Reacting to Goldman Executive’s Resignation Letter

Our live blog updates are done for the day, but The New York Times will have more coverage of the topic throughout the night including articles by DealBook’s Susanne Craig and Kevin Roose.

Paul Volcker suggested that the Volcker Rule might help stop the sort of conflicts of interest that Mr. Smith said occurred at Goldman, reports DealBook’s Peter Eavis from the Atlantic magazine’s Economy Summit in Washington.

The ex-Fed Chairman said that trading businesses that have become a big part of Wall Street over the past 20 years can “lead to a lot of conflicts of interest, and enormous compensation — when you’re doing well.”

It seems every media outlet has an angle about Greg Smith.

Table Tennis Nation is getting tips about Mr. Smith’s ping pong prowess.

We’re trying to find out as much as possible about Greg Smith, the Goldman Sachs employee who resigned very publicly with a New York Times OpEd in which he calls the firm “toxic” but lists winning a bronze medal in table tennis among his greatest achievements.

An eyewitness for the site confirms that Mr. Smith “was a decent player, about an 1800 (at best) using USATT rankings, which means he was capable of keeping up in matches, but way below any seriously competitive ability.”

Whitney Tilson, the founder of T2 Partners, sent a letter to the ValueWalk web site, saying that Goldman is accused of increasingly being profit driven, but so is every firm.

“Our direct experience as a client of Goldman has been universally positive. The many people we have dealt with there have all been exceptionally talented and high-grade, and never once have we had a negative experience in which we felt that they took advantage of us or didn’t do what they said they would do.”

No word from the opinion desk yet on whether the former coach of the Knicks has penned an article about the team’s decline. But when the history books are written about the Knickerbockers, they may reflect that Carmelo Anthony and Amare Stoudemire lost hold of the team’s up-tempo culture on their watch. DealBook truly believes that this decline in passing represents the single most serious threat to Linsanity’s long-run survival.

Matt Taibbi of Rolling Stone magazine has made a career out of taking Goldman down a notch. So it is not surprising that he found a lot to like in Mr. Smith’s op-ed article, but the author of “The Great American Bubble Machine” also provides a recap of his earlier coverage along with details on Senator Carl Levin’s financial inquiry.

“This always had to be the endgame for reforming Wall Street. It was never going to happen by having the government sweep through and impose a wave of draconian new regulations, although a more vigorous enforcement of existing laws might have helped. Nor could the Occupy protests or even a monster wave of civil lawsuits hope to really change the screw-your-clients, screw-everybody, grab-what-you-can culture of the modern financial services industry.”

Financial bloggers continue to greet Mr. Smith’s op-ed with skepticism. Bess Levin of DealBreaker has a PG-13 take on why the head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa has resigned.

• “He saw the firm hiring people with unpaid parking tickets.”
• “He saw employees not being sufficiently chastened as a result of Matt Taibbi’s article in Rolling Stone. He saw clients being called muppets. MUPPETS!”
• “Did he see illegal behavior? No. Is he pretty sure it’s happening but cannot say definitively at this time for legal reasons? Yes. Every day, in fact.”

A Facebook profile that appears to belong to Greg Smith of Goldman-quitting fame has shared a link to the op-ed in today’s New York Times. So far 25 of Mr. Smith’s 207 Facebook friends have “liked” the article. “Congratulations Greg! You are amazing!” writes one friend. “Thanks for writing this. I’d love to catch up sometime.” At press time, Mr. Smith had yet to respond to DealBook’s friend request.

Azam Ahmed of DealBook and Jackie Calmes write that “it would be hard to imagine a tougher start for Goldman Sachs‘s new public relations chief, Richard Siewert Jr.”

“He’s toast,” says William Cohan, the author of “Money and Power: How Goldman Sachs Came to Rule the World,” “He is completely toast in terms of Wall Street, no question about that. He is in the witness protection program right now.”

Goldman’s stock is down more than 3 percent today, to $120.36 a share in afternoon trading. Overall bank stocks are higher after the Federal Reserve said yesterday that 15 of the 19 largest financial firms had passed a “stress test” and had enough capital to withstand a recession.

DealBook’s Kevin Roose has gathered some anonymous reactions from former Goldman Sachs employees and other financial services workers.

“Some of this seems like obvious criticism that simply jumps on the anti-GS/Wall Street bandwagon (too greedy), and, cynically, it’s coming from an executive director (after 12 years?), not a managing director or someone who is particularly well-known around the firm.” — former Goldman analyst, who left the firm in 2011

From the author Michael Lewis to the former AIG executive who resigned in a New York Times op-ed before it was cool, Daniel Gross of Yahoo has compiled a list of Wall Street’s literary angst.

“The Triumphant Jerk. In October 2008, as the financial world was melting down, hedge fund manager Andrew Lahde danced on the graves of many of his colleagues. He released a letter to the Financial Times explaining that he was shutting his hedge fund because he had already made enough money, and no longer wanted to deal with a bunch of idiots. Oh, and the missive included a plea for the legalization of pot. Has not been heard from since.”

DealBook has received an e-mail from a Goldman representative responding to Mr. Smith’s Op-Ed article.

In a message to the company’s employees, Mr. Blankfein and Mr. Cohn write that “it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments.”

You can read the complete letter below.

March 14, 2012
Our Response to Today’s New York Times Op-Ed
By now, many of you have read the submission in today’s New York Times by a former employee of the firm. Needless to say, we were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients.

In a company of our size, it is not shocking that some people could feel disgruntled. But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion. But, it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments.

While I expect you find the words you read today foreign from your own day-to-day experiences, we wanted to remind you what we, as a firm – individually and collectively – think about Goldman Sachs and our client-driven culture.

First, 85 percent of the firm responded to our recent People Survey, which provides the most detailed and comprehensive review to determine how our people feel about Goldman Sachs and the work they do.

And, what do our people think about how we interact with our clients? Across the firm at all levels, 89 percent of you said that that the firm provides exceptional service to them. For the group of nearly 12,000 vice presidents, of which the author of today’s commentary was, that number was similarly high.

Anyone who feels otherwise has available to him or her a mechanism for anonymously expressing their concerns. We are not aware that the writer of the opinion piece expressed misgivings through this avenue, however, if an individual expresses issues, we examine them carefully and we will be doing so in this case.

Our firm has had its share of challenges during and after the financial crisis, but your pride in Goldman Sachs is clear. You’ve not only told us, you have told external surveys.

Just two weeks ago, Goldman Sachs was named one of the best places to work in the United Kingdom, where this employee resides. The firm was the highest placed financial services company for the third consecutive year and was the only one in its peer group to make the top 25.

We are far from perfect, but where the firm has seen a problem, we’ve responded to it seriously and substantively. And we have demonstrated that fact.

It is unfortunate that all of you who worked so hard through a difficult environment over the last few years now have to respond to this. But, our response is best demonstrated in how we really work with and help our clients through our commitment to their long-term interests. That priority has distinguished us in the past, through the financial crisis and today.

Thank you.

Lloyd C. Blankfein
Gary D. Cohn

Reuters reports that Bill McDermott, the head of the defined contribution business at Goldman Sachs, has left the firm.

Felix Salmon, the influential finance blogger at Reuters, says that the timing of Mr. Smith’s exit right after bonus season is not a coincidence. “The question is, why decide to quit in as public and destructive a manner as possible?” Mr. Salmon writes that where the former Goldman executive director goes next may reveal his motivations. Does he join a rival company or a regulator?

“Smith has been in this business for 12 years, and he’s done extremely well by it. And to a certain extent, if the people who work for him are constantly asking how good a deal is for Goldman, rather than how good the deal is for Goldman’s clients, then that’s because of the example he set. What’s missing in his op-ed is any sense of mea culpa, any sense that he was at all part of the problem.”

Joshua M. Brown, a/k/a/ The Reformed Broker, told Business Day Live that people need to ask if “is this a Goldman thing or is this really just something about the way the principal versus agency business model is set up? And whether or not you have to sell some things and make some money if you’re going to be on Wall Street.”

Live on set for @nytimes Business Day //t.co/Z4huVO4A
— Downtown Josh Brown (@ReformedBroker) 14 Mar 12

The humorist Andy Borowitz has published a satirical letter from Mr. Blankfein to Goldman’s clients in which the chief executive officer responds to Mr. Smith’s op-ed excoriating the financial firm.

“Mr. Smith comes across as a man of conscience, ideals, and high moral standards. And as you read his words, you no doubt asked yourself this troubling question: how could Goldman have hired such a person?”

But who will replace Mr. Smith as executive director? Michael Comeau posts his application on Minyanville.

“My proudest moments in life — getting accepted to Brooklyn College, passing Intro to Chemistry, and competing in countless Wiffle-ball and roller-hockey games, known as the Brooklyn Olympics — were achieved through pure awesomeness, with no shortcuts.”

AMCJon Hamm as Don Draper.

In season four of “Mad Men,” the ad executive Don Draper loses the account for Lucky Strikes and publishes a letter titled “Why I’m Quitting Tobacco.”

Micheline Maynard of Forbes, a former senior business correspondent for The New York Times, compares the letter with Mr. Smith’s op-ed resignation.

Smith, in his closing paragraphs, drops his resignation bomb. “Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me any more.”

He adds: “People who only care about making money will not sustain this firm — or the trust of its clients — for very much longer.”

Draper’s denouement: “So as of today, Sterling Cooper Draper Price will no longer take tobacco accounts. We know it’s going to be hard. If you’re interested in cigarette work, here’s a list of agencies that do it.”

He concludes, “As for us, we welcome all other business because we know our best work is ahead of us.”

DealBook loves Mr. Draper, but we can’t help wondering what would happen if Mr. Smith had ventured into 200 West Street for a very public, Jerry Maguire-style exit.

Mr. Smith revealed a number of colorful phrases that he said were being used inside Goldman. For example, clients are called Muppets. Juli Weiner of Vanity Fair tackles the local lingo:

So, are we doing this right? “I’m going to hunt elephants and get these muppets to take on some axes!”

In comments to The London Evening Standard, officials from Labour and the Liberal Democrat party were united in condemning Goldman,

“We all know in the City that Goldman help themselves before they help their clients — here is the proof. Greg Smith says you get promoted there if you are not an ‘axe murderer’, and the people of Greece and the rest of the eurozone are paying the price.” — Lord Oakeshott, a ormer Liberal Democrat treasury spokesman.

“At last somebody has come out and exposed what has been really going on. There is a real challenge to the Government to sort this out and make sure the banking industry is properly focused on its customers.” — John Mann, a Labour MP and a member of the Treasury select committee.

Aveneesh Singh Saluja, a former intern for Mr. Smith at Goldman Sachs, discussed his former boss with Business Insider.

“I hold him in very high regard – he took care of us junior guys, gave us great pieces of advice, and in general came across as one of the more personable, friendly, and genuine guys on the floor.”

The Atlantic wrote that “these complaints, of course, are the same charges that have been lobbed at Goldman for years, particularly since the economic meltdown in 2008.” But coming from an insider gave them more credence: “To hear them now, from a former true believer — Smith started at the firm as intern 12 years ago, and has been there ever since graduating from Stanford — makes them particularly damning.”

Several media outlets wondered about what the letter would mean for Goldman’s reputation, which has taken a hit since the financial crisis. Mr. Smith’s letter came just one day after Goldman officially hired a new public relations chief, Richard Siewert Jr., known as Jake, a former counselor to Treasury Secretary Timothy F. Geithner.

Business Insider said “this seems sure to be the buzzy Wall Street story of the day.” The financial blog added that it’s “also sure to be another PR nightmare for Goldman Sachs.”

The BBC Business editor, Robert Preston, said:

From the Wall Street Journal’s economics editor:

On Twitter, the Epicurean Dealmaker, a financial blogger wondered about Mr. Smith’s future, given his scathing criticism of Wall Street.

Jim Cramer, the CNBC personality and money manager, lamented the piece.

Greg Smith’s op-ed resignation has inspired parodies from galaxy’s far, far away.

The letter even spawned a spoof. The Daily Mash ran a mock editorial titled “Why I am Leaving the Empire, by Darth Vader,” reworking Mr. Smith’s words in the language of Star Wars.

After almost 12 years, first as a summer intern, then in the Death Star and now in London, I believe I have worked here long enough to understand the trajectory of its culture, its people and its massive, genocidal space machines. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, throttling people with your mind continues to be sidelined in the way the firm operates and thinks about making people dead.