By the time you read this, the PR hacks of Goldman Sachs will be vigorously pressing their efforts to destroy the reputation of whistle-blower Greg Smith, a former Goldman executive director whose exposé in Wednesday’s New York Times Op-Ed page was so devastating that the 143-year-old firm might actually, finally, be held accountable.
People walk to work outside the Goldman Sachs headquarters in New York in 2010.(AP/Mark Lennihan)
Smith, a wunderkind who spent the 12 years after he graduated from Stanford University rising through the ranks at Goldman, has revealed the firm’s culture to be so fundamentally venal that were financial industry shenanigans not generally exempt from effective legal regulation, Goldman’s executives could have been rounded up Wednesday morning on organized-crime charges.
The law that exempted what would have been illegal trading in the murky derivatives that the Smith article denounced was the Commodity Futures Modernization Act, enthusiastically signed by Bill Clinton in the waning months of his administration. The legislation shielded from any regulatory law the very activities that led to the financial meltdown from which Americans are still reeling.
Back in the Clinton era, it fell to the president’s last press secretary, Jake Siewert, to justify the freeing of Wall Street investment houses to do their worst, and in one of those delicious ironies Siewert was appointed as a managing director and the global head of corporate communications for Goldman Sachs the day before the devastating Smith exposé broke.
Who better to hastily concoct a strategy of explaining away Goldman’s deceit in the sale of those derivatives? Predictably there was the quickly leaked memo by Goldman CEO Lloyd Blankfein shooting Smith, the previously highly valued young messenger, as a “disgruntled” employee for daring to describe the culture within Goldman “as toxic and destructive as I have ever seen it.”
Smith’s charge about Goldman “routinely ripping their clients off” resonated widely on the Internet because of prior exposures of suspect derivatives deals in which Goldman explicitly bet against the products it was selling. Slightly less than two years ago the Securities and Exchange Commission filed fraud charges against Goldman that resulted in a $550 million fine over such double-dealing.
But what is so damning in Wednesday’s article is Smith’s insistence that the culture of Goldman has only gotten worse since then: “Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.
