Midlevel executives at big Wall Street firms leave every day of the week, particularly if — as was the case with Greg Smith — they've worked somewhere for 11 years and haven't "made" managing director. Usually, the departures are "friendly," even if they really aren't. You use your credentials — and the references — from that top firm to get a job with a slightly less top firm or with a client or affiliate. What you don't do is trash your old firm, which makes you a pariah.
So Smith's decision to go public with his criticism of Goldman Sachs, one of the most famous and successful firms on Wall Street, not only in a farewell email to his colleagues but also, literally minutes later, in a stinging opinion piece in The New York Times was, in professional terms, nuts. It won't get him his next job, unless it's with a public interest group. The knives will be out, with his former colleagues sure to paint a picture of a disgruntled former employee frustrated by his failure to make it to the top, or to make more than $500,000 — which sounds like a lot to the 99 percent, but not to folks at places like Goldman.
But what is most remarkable about Smith's departure is not that he would commit professional suicide, but that in doing so he would get so much attention.
Count 'em: six stories the next day in The New York Times, including two on the front page and three more on the front page of the business section.
Smith struck a chord, and everyone knows it.
If you believe his supporters, Smith is a principled guy who had hoped that an internal review at Goldman, which followed settlement of an SEC investigation, would bring about real change. According to him and others quoted by the press (anonymously, of course, professional suicide not being a growth industry in a tough economy), the report was given short shrift, as were Smith's efforts to raise his concerns with his superiors.
So he decided not to go gently into the night.
According to Smith, greed pervades the culture at Goldman. That is not exactly news. Gordon Gekko's famous proclamation in the movie "Wall Street" that "greed is good" is not all that different from philosopher and economist Adam Smith's politer endorsement of the public value of private self-interest. But being greedy on behalf of your clients and, incidentally, yourself is different from being greedy at the expense of your clients, which is what Smith charged. He had a list of colorful names used for clients, but the underlying conduct of which he accuses Goldman goes way beyond name-calling.
One of the most basic principles of law is that investment advisers owe a fiduciary duty to their clients and the funds they manage. The definition of a fiduciary duty is very simple: The client comes first, his interests before yours Smith claims that at Goldman it was just the opposite.
The reaction has been as stunning as the charges, and not just in terms of the numbers of stories. While Goldman is obviously defending itself, others are quoted as saying that this is old news, that Goldman has always traded against its clients. Ho-hum.
Well, it may have been ho-hum some years ago, when everyone didn't have a friend or a neighbor who was unemployed and when our tax dollars hadn't been used just a few years ago to bail out Wall Street.
But in 2012, it is not ho-hum.
This is a story that will not go away by tomorrow, if for no other reason than that the biggest story of the year — the presidential election — is likely to shape up as a fight in which Wall Street and the 1 percent are pitted against everyone else. Sure, President Obama will probably raise as much or more money from Wall Street as Mitt Romney, but he is not "of" it in the same way the former head of Bain Capital is. He didn't work there. He doesn't look (and I don't mean race, although Wall Street is overwhelmingly not African-American, or female for that matter) or talk like somebody who did. And his party is most certainly not the party that represents Wall Street.
Smith may not go to Washington, but his charges will certainly reverberate there, and from there, across the nation. Today, the business section. Tomorrow, the political pages. Here comes campaign 2012. This much we know: The campaign is going to focus on the economy. It will be imbued with an "us against them" tinge, and it will be every bit as tough as Goldman was for Smith. But the name-calling will be much worse.
To find out more about Susan Estrich and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.
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- Wall Street
- Goldman Sachs
- Adam Smith