In the fall of 2009, back when the sky was falling, Goldman Sachs’ top man, Lloyd Blankfein, explained to The Times of London that his bank was doing “God’s work.” At the time we weren’t sure what Blankfein was getting at.
Perhaps he flattered himself into thinking his firm was efficiently allocating capital to its highest and best use…and that this was, somehow, the work of God. We don’t know. Nonetheless, in an essay titled, Hell To Pay, we scribbled out some thoughts on how Blankfein may have reached this conclusion.
There are some basic rules to how the world works, we reasoned. And there are consequences for ignoring them. For example, you can’t get something for nothing, artificially suppressing the price of money distorts an economy, and, most importantly, a fool and his money are soon parted.
Recognizing these basic rules, we surmised, is also acknowledging there’s a divine moral and natural order to the world. Consequently, we concluded, Blankfein was right. Based on the presence of a divine order, by separating fools from their money, Goldman Sachs was, in fact, doing “God’s work.”
But that was then…this is now…
Barfing On Goldman Sachs
One of the joys of living, in addition to not dying, are the rare occasions when one can witness the vanity of the elite, fully exposed, as it gets covered in barf. This Wednesday, Greg Smith provided one of these priceless moments by barfing all over Goldman Sachs in the New York Times.
In an op-ed piece simply titled, Why I Am Leaving Goldman Sachs, Smith, a longtime employee at Goldman Sachs, resigned. Here are some of his reasons why…
“Today is my last day at Goldman Sachs,” began Smith. “After almost 12 years at the firm … I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. 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, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.
“I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets.’
“Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.”
Compulsory Profits Off the Back of Every American
No doubt, Smith is on to something. Even from our cheap seats – on the outside looking in – it appeared the culture at Goldman Sachs was rotten to the core. However, Smith’s inside look significantly illuminates our viewpoint.
Here, with our newfound clarity, we’ll offer some reflections…
Ripping off private clients, while both immoral and inadvisable, is Goldman’s choice. Likewise, it’s the client’s choice whether they continue to do business with Goldman. When a mechanic swindles us we take our business elsewhere. Goldman’s clients should do the same.
What we really take issue with is the fact that, in the fall of 2008, Goldman Sachs received a backdoor bailout of $14 billion courtesy of AIG. In other words, without the government’s benevolence – courtesy of the taxpayer – it’s possible Goldman Sachs would no longer exist.
Yet, by the close of 2010 Goldman Sachs had reported nearly $22 billion in profits over the prior two years. Over this same period they paid out over $31.6 billion in compensation to their employees. What this means is not only did Goldman Sachs make money off their muppet clients, they profited off the back of every American.
Alas for the taxpayer they had no choice in the matter…their contribution to Goldman Sachs was compulsory.
Sincerely,
MN Gordon
for Economic Prism
Return from Compulsory Profits Off the Back of Every American to Economic Prism
