Goldman Sachs Exec Quits, Calling Firm ‘Toxic’
Aaron Smith, NEW YORK, (CNNMoney)
A Goldman Sachs executive has resigned in a very public manner — calling the firm “toxic” and disrespectful of its clients in a scathing op-ed piece published in Wednesday’s New York Times.
“I can honestly say that the environment now is as toxic and destructive as I have ever seen it,” wrote Smith on his “last day at Goldman Sachs,” capping 12 years with Wall Street’s gilded firm.
Smith — who resigns as a Goldman executive director and head of U.S. equity derivatives business in Europe, the Middle East and Africa — detailed the disintegration of the company’s culture during his time there.
Smith’s main gripe is that the firm cares more about making money from its clients than making it for them.
“It makes me ill how callously people talk about ripping their clients off,” he wrote. “Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets,’ sometimes over internal e-mail.”
Goldman spokesman Michael Duvally released a statement that contradicted Smith’s diatribe.
“We disagree with the views expressed, which we don’t think reflect the way we run our business,” said Duvally. “In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.”
Smith also expressed disappointment with the firm for failing to correct its cultural decline, even after a series of high-profile scandals cast the company in a negative light.
“Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids?” he wrote. “No humility? I mean, come on. Integrity? It is eroding.”
Smith was referring to the Securities and Exchange Commission’s investigation against the firm for its role in underwriting subprime mortgages in 2006, which helped to unravel the housing market.
“Fabulous Fab” is the self-applied moniker of Goldman trader Fabrice Tourre, who was accused by the SEC of selling Abacus, a portfolio of real estate investments selected by hedge fund Paulson & Co., which had an interest in its failure. Tourre declared himself “Fabulous Fab” in an internal e-mail, which emerged during a federal investigation.
Sen. Carl Levin, a Michigan Democrat, led the Congressional investigation into Abacus.
“God’s work” is the self-described job description of Goldman Chief Executive Officer Lloyd Blankfein. “Vampire squid” is the famously unflattering nickname applied to the company by Rolling Stone writer Matt Taibbi.
Going forward, Smith stated bluntly than the 143-year old firm won’t last unless it corrects the current state of its corporate culture.
“It astounds me how little senior management doesn’t get a basic truth: If clients don’t trust you they will eventually stop doing business with you,” he wrote. “It doesn’t matter how smart you are.”