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Wednesday, March 14

Goldman Sachs Letter - The Collection

This post will be updated as the story progresses. You can follow me on Twitter, Facebook, paper.li

14-MAR
Why I Am Leaving Goldman SachsNYT
Executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa: TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — 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.


How to Quit a Job Without Publishing an Op-EdThe Reformed Broker
The "culture" of Goldman Sachs was, is and always will be about making money, often at the expense of a client.  Do you even know where the term "wirehouse" originally came from?

Why I am leaving the Empire, by Darth VaderThe Daily Smash

Bankers versus bitching rights, a graphical representationalphaville / FT

Goldmanite dynamitealphaville / FT

On leaving Goldman SachsPragmatic Capitalism
I’m a firm believer in the importance of Wall Street.  But I also worry about the negative effects of financialization and the vast impact this is having on society.  Unfortunately, the world is just starting to catch on to this effect and it’s way too late….

The Sad State of Goldman, Merrill, et. al.EconoMonitor
I hope I am not overly romanticizing the Wall Street of old. When you speak to some of the folks who have a long tenure in this business, you hear great stories of the old days

The Volcker Rule and the Goldman ControversyDealBook / NYT
Some bankers have claimed that Mr. Volcker did not t understand the distinction between trading and underwriting. “Of course, they say I don’t understand it,” said Mr. Volcker said as he left the main conference space. “I understand it all too well.”

Model this (the Goldman guy)Marginal Revolution
This strikes me as economically naive.  Is it at least possible that the culture at Goldman has changed (I am not myself committing to any assessment here of GS) because profit maximization dictates such a shift?

Is Greg Smith 'Toast' After Exposing Goldman?Pension Pulse
I'm not as quick to dismiss Mr. Smith as a 'disgruntled employee' because I've seen with my own eyes the good, the bad and the downright ugly at Goldman Sachs.

Goldman Sachs Related HumorThe Big Picture

Goldman Sachs Banker Quits ‘Toxic’ Firm: Will Clients Flee Next?TIME
The charges, in other words, are familiar, and will only fan the flames of popular anger at Goldman, which has already become a symbol for the excesses that helped produce the global financial meltdown and resulting recession.

“Our Response to Today’s New York Times Op-Ed”alphaville / FT
The official reply from the Goldie Stix

FYI, Whitney Tilson’s Investment Thesis On Goldman Sachs Has Not Changed In Light Of Times Op-EdDealbreaker
Comedy, but deceivingly good – I thought it was written seriously.

The ballad of Greg SmithFelix Salmon / Reuters
So let’s not pretend to be shocked that the most successful bankers are the ones who make the most money off their clients. And let’s not try to imply that the solution to this problem lies at the Goldman Sachs board level. It doesn’t. The real muppets, in this story, are Goldman’s board members, who have never had any real control over how the company is run.

Resignation Letter Reveals Goldman Sachs Is In The Business Of Making Money, Hires People Who Don’t Know How To Tie Their ShoesDealbreaker
More comedy.

Yes, Mr. Smith, Goldman Sachs Is All About Making MoneyBB
It must have been a terrible shock when Smith concluded that Goldman actually was primarily about making money. He spares us the sordid details, but apparently it took more than a decade for the scales to finally fall from his eyes.

15-MAR 
We Speak on RT TV About Goldman’s Predatory Culture and the Latest Stress Testsnaked capitalism
Goldman once cared about the value of its franchise, and that constrained its behavior. So it was “long term greedy,” eager to grab any profit opportunity but concerned about its reputation.

“How Much Money Did We Make Off The Client?”The Daily Capitalist
I’m not saying they are crooks and neither does Mr. Smith. I worked for a brokerage firm 40 years ago…was pretty good at it. But the pressure was constant to “get your gross up”. I quit.
oldman

Executive’s Letter Draws Backers, Detractors and SatiristsDealBook / NYT
If Greg Smith hoped to generate some buzz around his departure from Goldman Sachs, then he succeeded.

Public Rebuke of Culture at Goldman Opens DebateDealBook / NYT
the ripple effects were felt beyond Wall Street. Shares of Goldman fell 3.4 percent. And media coverage was worldwide.

Name It; Clients Are Called ItDealBook / NYT
Are you a Muppet or a Clancy? A Bobblehead or a Clampett? You may be, even if you do not know it. All of these are less-than-flattering code names that companies in a variety of industries have used to describe some of their customers or clients.

Greed Is Indeed Good at Goldman?EconMatters
The letter and its link has immediately gone insanely viral and trending worldwide.  That was probably one factor that sank GS stock by 3.5% on the day while the broader market was essentially flat

Executive Director of Goldman Sachs Resigns Over Parasitic Behavior of Goldman to Its Clients; Reflections on Chasing PerformanceMish’s
Over time, purposely brainwashed employees move higher and higher up the ranks. A trickle down effect ensures that subordinates believe they are serving clients' interests when they are in reality doing nothing of the sort.

Hypocrisy as a Business ModelThe  Epicurean Dealmaker
So, why doesn’t your top management just come clean? Because that would defeat the purpose of maintaining your client service fiction in the first place: it makes money for your firm. Just not in the way you claim it does.

Wall Street’s Latest Campus Recruiting CrisisDealBook / NYT
“There have always been unhappy people” in finance, he added, but “this is the year people are realizing things are structurally different.” The smaller paychecks are only making the decision easier for some students, who no longer view Wall Street as a fast-track to seven figure salaries.

The Devil Wears PinstripesMarketplace
Did Goldman change the way it did business? Maybe. But the more likely view is that those flaws - in the industry, in the firm, in other firms - have been there for a long time and the scales just fell from his eyes when it finally turned against him.

A Civil War at Goldman?NetNet / CNBC

Greg Smith goes rogue on Goldman SachsThe Deal
Is there a backstory here that doesn't involve moral revulsion at a corporate culture that, in his view, has curdled? A prediction: A backstory will appear. It will be ugly. Anonymous sources from within and around Goldman will report that Smith a) was…

13 Reasons Goldman's Quitting Exec May Have a PointHITC
There have obviously been plenty of unflattering headlines about Goldman in the past few years. We decided to look at just one aspect of their record: SEC charges levied against Goldman and its employees over the past decade.

Goldman Staffer Breaking Ranks Is AstonishingHITC
What makes this criticism so powerful is that the letter is, in fact, a plea for Goldman to get back on track

Goldman Sachs workers on executive's exit: 'We can't, we're not… no comment'The Guardian
The company's employees had little to say about Greg Smith's scathing resignation column – but it's still the talk of Wall Street

Goldman's Not Changed (But Greg Smith Might Have Done)HITC
It's human nature to want to make a profit and to maximise one's status and usefulness within a team. Profit margins are an essential part of any business. But investment banks (yes, all of them) have to learn some essential lessons about how far to push it.

Muppets of the world uniteThe Guardian
What would change matters is if governments, among the most important Goldman clients, take their business elsewhere. That would be a proper blow to the heart of the organisation

Interactive Feature: A Chorus of Criticism for GoldmanDealBook / NYT
Since the financial crisis, Goldman Sachs has faced a wave of criticism from politicians, regulators, protesters and writers.

Late-Night Comedians Riff on Goldman Op-EdMedia Decoder / NYT

Public Rebuke of Culture at Goldman Opens DebateDealBook / NYT

At Goldman, short-term greed vs. long-term greedWonkblog / WP
For Goldman Sachs, the real damage of the last two days didn’t come from disgruntled trader Greg Smith’s resignation op-ed. It came from Goldman’s defenders.

Goldman mind-meld: Not true but not helpfulPolitico
impression that many inside the firm don’t really agree with much of what the London-based former equity derivatives salesman said.

Can Obama’s Wall Street reform address Greg Smith’s problem with Goldman?Wonkblog / WP
Smith’s disillusionment with Goldman had more to do with the culture of the firm than with any specific trading practices, so he and his sympathizers aren’t likely to be satisfied with technical fixes.

The Volcker Rule and the Goldman ControversyDealBook / NYT
Some bankers have claimed that Mr. Volcker did not t understand the distinction between trading and market-making. “Of course, they say I don’t understand it,” said Mr. Volcker said as he left the main conference space. “I understand it all too well.”

The 'long-term greedy' canardJames Saft / Reuters
Nostalgia for the era when bankers were "long-term greedy" is a red herring, misdirecting our attention to how banks govern themselves when the true issue is how they are governed.

Secret deals, foreclosure settlements, stress tests and vampire squid whistle-blowers: you just can’t make this stuff upL. Randall Wray / EconoMonitor
No Hollywood scriptwriter could plot a more implausible story. Here is the plotline sequencing:

As Whistleblowing Becomes The Most Profitable Financial 'Industry', Many More 'Greg Smiths' Are ComingZH
Naturally, the assumption is that the secrets of Wall Street's dirty clothing are supposed to stay inside the family, or else one may wake up with a horsehead in their bed. There is one small problem with that. Now that compensations on Wall Street have plunged, and terminations are set for the biggest spike since the Lehman collapse, the opportunity cost to defect from the club has also collapsed.

16-MAR
Goldman Roiled by Op-Ed Piece?Pension Pulse
Again, this is a bit harsh. My professional work experience on the buy and sell side tells me that narcissistic egomaniacs lurk all over the place, not just Goldman. If I shared half the stuff I've seen with my own eyes, you'd be floored!

Final Thoughts on GS ControversyThe Big Picture
I suspect this meme has just about run its viral course. To me, the key takeaways are as follows:

Wall Street Pimps and Whores Story Extends Far Beyond Goldman Sachs: Merrill Lynch, Citigroup, Bank of America, Morgan Stanley, All GuiltyMish’s
Wall Street pimps and whores have no fiduciary responsibility to clients but they do have a vested interest to peddle compete garbage to anyone and everyone. For that reason, I am strongly in favor of  a "hard" wall between giving investment advice and offering securities to trade. Clearly the "soft promise" by Wall Street that "we won't do it" is insufficient.

Why Greg Smith was right about Goldman SachsThe Guardian
Resignation letters may be self-serving, but Smith's rang true: Wall Street is a conspiracy of the super-rich against the public

My Statement Regarding Greg Smith's Goldman ResignationNomi Prins
I would hope that the message behind Smith's resignation will not be obfuscated by debates over the extent to which the firm's clients are either supported or exploited, but instead, serve as a powerful call to foster a more-strictly delineated and less reckless financial system.

7 Ways of Seeing Goldman SachsTIME
So it appears that the debate over Greg Smith is turning into a proxy for the same debate we’ve been having over the past four years, namely, What is capitalism, and how much or how little regulation do we need to make it function effectively?

Goldman’s Alpha War (Mar 2011)Vanity Fair
Steve Friedman’s decision to quit as chairman of Goldman Sachs, in 1994, during one of its darkest hours, stunned and angered his partners. And despite Friedman’s maneuverings, it created a leadership crisis as the mismatched team of Jon Corzine (future New Jersey governor) and Henry Paulson (future Treasury secretary) took the helm. In an adaptation from his book on Goldman, William D. Cohan reveals how secret merger discussions put the expansive trader and the hardheaded banker on a collision course, setting the stage for the firm it would soon become. h/t the trader

Does Morality Have a Place on Wall Street?NYT
Was Smith being naïve to think that what he saw was anything other than business as usual? – Collection of 8 essays

Cumulatively Disillusioned: A Partial Defense of Greg SmithInterloper
I would argue furthermore that this arc – initial wonderment and satisfaction steadily eroded by cumulative disgust  - is extremely common among financial professionals. 

What Brokers Call Clients Behind Their BacksTotal Return / WSJ
The shock isn’t that the big kahunas at an investment bank might disparage their clients. The shock is that anyone should be shocked by it.

Incentives matter when it comes to investingAbnormal Returns
How you get paid affects how you do your job. That is why it is so important to know how all the various parties you interact with in the financial world are compensated.

Why banks will continue to rip off clientsFelix Salmon / Reuters
So let’s be assiduous when it comes to regulation, because neither banks nor their boards are going to lift a finger to protect client interests. Not when they’re trying to maintain and maximize their own profitability.

Goldman Sachs Accuser Greg Smith (Might Have) Lied About That Which He Holds Most SacredDealbreaker
But, after months of beating down a nagging little voice, a moment of truth presented itself that he could not deny.

The Art Of The FarewellDealbreaker
Not everyone gets to write a New York Times Op-Ed when they quit their job, however disaffected. It’s also easier to quit a job after twelve years of cashing investment banking paychecks.

In Visit, Bloomberg Defends Goldman SachsNYT
“When someone departs, those of us who stay are hurt,” Mr. Bloomberg wrote. “They’ve become bad people. Period. We have a loyalty to us. Leave, and you’re them.”

Bloomberg Boosts Goldman’s Damage-Control EffortNew York Magazine
Mayor Bloomberg, never to be matched in his kinglike benevolence, paid a visit to a place where absolutely no one wanted to be today: Goldman Sachs HQ in Manhattan.

17-MAR 
Greg Smith vs. Goldman SachsMacro and Cheese
Greg Smith seems to have mistaken his employer for the Red Cross, even though he managed to sell quite a few Goldman products over the years.

18-MAR 
Making Sure Your Exit Music Is Loud and ClearNYT
We’ve all dreamed about it at one time or another — that exquisite moment when we finally muster the courage to tell the boss what we really think.


Goldman Sachs Has Friends in High Places, Led By Mayor BloombergTIME

Muppets 1 Gollums 0The  Daily Capitalist
But if it causes investors (be they muppets or not) to re-examine their sense of trust in the system and reassess those entities most deserving of that trust, it will not have been published in vain.

How Wall Street Deals With ConflictsDealBook / NYT
Ultimately, the rule of caveat emptor — let the buyer beware — is how conflicts of interest are dealt with on Wall Street. If you know the person on the other side of the deal is looking to take you for all your worth, then you will be much more wary about the terms of any transaction.

20-MAR
Three’s a CrowdThe Epicurean Dealmaker
the conversion of Goldman Sachs and other investment banks from private partnerships owned and run by their employees for the benefit of their employees to publicly-traded corporations beholden to third party shareholders permanently and irrevocably upset the historical balance at the core of my industry…