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Ex-worker: Goldman sees clients as 'muppets'

Official exits company in stinging op-ed essay

NEW YORK -- Goldman Sachs, arguably the most storied investment bank on Wall Street, has been compared to a money-sucking vampire squid and called the evil empire of finance. On Wednesday, it got a different kind of black eye -- delivered by one of its own.

Greg Smith, head of the firm's U.S. equity-derivatives business in Europe and the Middle East, resigned with a blistering newspaper op-ed essay accusing the bank of losing its "moral fiber," putting profits ahead of customers, and dismissing customers as "muppets." The decline of the bank's culture, he wrote, threatened the bank's survival after 143 years.

The essay, "Why I Am Leaving Goldman Sachs," appeared in the New York Times. It was the talk of Wall Street and was circulated online. Mr. Smith became a trending topic on Twitter.

CNBC, the financial news channel, ran clips of the ornery balcony critics from The Muppet Show. Other Web sites posted spoofs: "Why I am leaving the Empire," allegedly penned by Star Wars' Darth Vader, was one getting attention.

Goldman swiftly issued a statement: "In our view," the bank wrote, "we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves."

Mr. Smith worked for Goldman in London. He wrote he attended sales meetings in which helping clients was not part of the discussion. "If you were an alien from Mars and sat in on one of these meetings, you would believe that a client's success or progress was not part of the thought process at all."

Mr. Smith wrote that Goldman had devolved from a firm he was proud to work for. He said the bank needs to "weed out the morally bankrupt people" and suggested the erosion of Goldman's culture threatened its future. "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," Mr. Smith wrote.

"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,' sometimes in internal emails," he writes.

On Wall Street, the essay may have been shocking in tone, but it was not surprising in content. Goldman's peers, even some of its customers, take its pursuit of profit as ordinary business.

"I would be very surprised if it did anything more than anger the people who are already hostile to Goldman," said Lawrence Baxter, a former Wachovia executive who teaches at Duke University.

He added it was difficult to tell whether the essay was "a genuine indication that things are badly out of line or just somebody who's really disgruntled."

Goldman's success has made it one of the most powerful engines on Wall Street. It survived the financial crisis in 2008, which crushed two rivals, Bear Stearns and Lehman Brothers, and hobbled another, Merrill Lynch.

Goldman is known for churning out leaders who run the world. Henry Paulson, Treasury secretary when the government devised its $700 billion rescue of the banks in 2008, is a former chief executive officer. So is Jon Corzine, the ex-New Jersey governor at the helm of MF Global when it collapsed.

Outrage against Wall Street has bubbled up in popular culture, most notably through the Occupy Wall Street protest movement. Matt Taibbi of Rolling Stone, a vocal Goldman critic who wrote the "vampire squid" line, said in a blog Mr. Smith's editorial might do what financial regulation and the Occupy movement could not.

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