Current and former Goldman Sachs (NYSE:GS) executives dispute claims in a New York Times editorial piece written by a former vice president, Greg Smith, that the culture at Wall Street’s most powerful firm has eroded to the point where it is now “toxic and destructive,” where Goldman executives disparage clients, calling them “muppets,” and that Goldman puts its trading interests ahead of clients.
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“Yes, we’re tough, yes we play hardball, but do we put our trading before clients? Absolutely not,” says a Goldman executive who asked to remain anonymous.
Another official noted that “we run a large fiduciary business as asset managers, so our client-focused culture is paramount,” adding, “if we put ourselves before our trading clients, then who the ---- are we trading for?”
When asked about disparaging comments about clients, a managing director said that traders at all Wall Street shops “talk like this all the time, it’s Wall Street. No one drags clients in here handcuffed, kicking and screaming, to do business with us.”
Also, like most all Wall Street employees, Smith, the former Goldman vice president who wrote the opinion piece, signed a nondisclosure/nondisparagement/noncompete contract with Goldman, the Goldman official says, declining to comment on whether it will take action against him.
Smith could not be reached for comment.
This official notes that the New York Times incorrectly reported that Smith received stock options.
“Smith got restricted stock units, but to qualify to take delivery of those units, the firm must classify you as a good corporate worker, a good ‘leaver,’ so to speak,” this official says, declining further comment as to whether Goldman will rescind Smith’s restricted stock units.
This Goldman official also said that the New York Times did not reach out to Goldman before or since Smith’s piece ran, to check it for accuracy.
“We vetted Mr. Smith and we edited the op-ed, and we’re not commenting any further,” says a New York Times spokesman.
Sources note that, as far as they are aware, Smith did not raise his concerns with Goldman prior to leaving and writing his opinion piece. Goldman has, via its London office, reached out to Smith “to get to the bottom of what is upsetting him,” the Goldman official notes.
When asked about the disparaging comments, the Goldman official said “it shouldn’t surprise anyone that people on trading desks talk this way, as do people in hospitals, precinct houses, or on news desks, people get referred to in all sorts of ways in a testosterone-driven environment,” adding that Goldman is continuing its internal probe of the matter.
Another executive said that if traders think of Goldman the way Smith characterized the firm, “they should not be here trading. It’s not who we are as a firm.”
This managing director said: “I can’t tell you how many meetings I’ve attended where all we talk about are our clients. That’s all we care about. We really do want to help our clients with their finances, even to the point of understanding what is going on in their personal lives, we really do care. It’s unfair to attack us in this way.”
Also, the Goldman Sachs official says its proprietary trading was never more than 10% of net revenues. “We shut down our prop trading desk more than a year ago, half of Goldman’s Sachs' principal strategies unit went into asset management, we liquidated the other half of those positions last year,” he says.
Goldman has 33,000 employees, and 12,000 are vice presidents. Smith was a vice president for six years -- Goldman says there is no set time period for when a vice president is promoted.
The former vice president’s editorial comes on the heels of a series of controversies that have dealt a black eye to the firm.
The Securities and Exchange Commission charged Goldman in 2010 with defrauding clients due to its alleged lack of disclosure over a complex subprime mortgage-backed security product, where Goldman’s marketing materials didn’t disclose the role of a prominent hedge fund, run by John Paulson, in selecting the assets to bet against.
Goldman paid a record $550 million fine to settle the allegations, neither admitting nor denying them. The U.S. Senate later took testimony from Goldman’s chief executive, Lloyd Blankfein.
Goldman was also recently charged with conflicts of interest in the $38 billion merger between El Paso (NYSE:EP) and Kinder Morgan (NYSE:KMI).