Goldman Sachs VP explains why he quit

Anderson Cooper: You heard people you work with talk about overcharging clients, bragging about it?

Greg Smith: Within week one, I met a junior guy who was 24 or 25 years old and the first thing he told me was he'd just traded a sophisticated derivative with a Muppet client who paid the firm an extra million dollars because the client was so trusting that he didn't check the price with other banks. Now you could think to yourself, "Is this some rogue guy who's just talking callously about clients?" But his boss, who's a managing director, was sitting right next to him nodding and chuckling along. And--

Anderson Cooper: The boss was laughing about it?

Greg Smith: Absolutely. They were both laughing about it.

Off camera, Goldman executives told us they conducted an investigation after Smith's article came out and found no evidence of wrongdoing. The firm did show us one London email in which clients were referred to as Muppets, but pointed out there was no mention of ripping those Muppets off.

Anderson Cooper: Something that Goldman says is, "Look"-- they have-- there are procedures in place where if you have concerns, you can raise a red flag and you can even do it confidentially. And yet, they say you didn't do that.

Greg Smith: Well, I spoke to nine senior partners of the firm, people who had been partners since 2004. If anyone at Goldman Sachs says, "We were surprised by this," they shouldn't have been.

Anderson Cooper: Goldman says that you wanted a million dollars in compensation, that you wanted a promotion and you later learned that you were not going to get that and that's what's behind this.

Greg Smith: I think that would be a criticism I would expect to hear from Goldman Sachs.

Anderson Cooper: Had they given you a promotion, had they given you a million dollars in compensation, would you still have quit?

Greg Smith: Absolutely.

Anderson Cooper: I think a lotta people would find that hard to believe.

Greg Smith: Well, well, what I can say to you is-- and, this may seem stupid, but I didn't go to Wall Street purely to make lots of money.

Anderson Cooper: But I don't know anybody who's ever gone to Wall Street w-- and not had the idea of making money--

Greg Smith: Oh, no, I definitely wanted to make money. But I left because things had veered so far from what I actually believed was right that I could have just left and walked out and said nothing about it. But I would have felt that was not the right thing to do.

Anderson Cooper: [to Partnoy] How do you think what he's saying is going to be viewed on Wall Street?

Frank Partnoy: I think people at Goldman Sachs will breathe a huge sigh of relief.

Anderson Cooper: Relief?

Frank Partnoy: I think they'll read this book and they'll say, "I thought there were going to be significant allegations of fraud and there aren't."

Anderson Cooper: I guess one of the most troubling things that Smith is saying is that large pension funds, philanthropic institutions, they're being sold very complicated financial products that they don't even understand. Is that true?

Frank Partnoy: It is true. And it's a real problem right now, particularly in an environment where interest rates are so low. And these institutions call a Wall Street bank and say, "We need something that will juice up our return, we need to make more money." And they're vulnerable when they do that.

Now that his book "Why I left Goldman Sachs" is finished, Smith told us he's not sure exactly what he'll do next.

Anderson Cooper: Why would any Wall Street bank in the future ever hire you?

Greg Smith: I was not doing this in order to get hired at another Wall Street bank. I really thought this through and thought it would be a constructive thing to do. And while Wall Street doesn't like to be criticized, I think the criticism is warranted.

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[spencermorfordschaffer]

what happened to my comment? Goldman Sachs is hoodwinking their clients if they are hiding commissions in their product sales just like unethical new car dealerships that get shut down for deceptive sales practices -- this is not a personal attack this is the truth. I note that Goldman now has all these cute, warm fuzzy commercials on the web with CBS -- maybe a bit nervous over the Smith piece. It really makes me angry that Goldman is pulling fast ones on TEACHER pensions, NURSE pensions -- they are cannabalizing the people entrusted to care for them unless they are all so filthy rich they don't need public school teachers and nurses.

[VCarr]

(To the tune of "Mrs. Robinson)

Where have you gone Sandy B. Lewis
A nation turns it's lonely eyes to you (Woo, woo, woo)
What's that you say, Mrs. Robinson
Sandy B. has left and gone away
(Hey, hey, hey...hey, hey, hey)

[John and Peg]

To Mr. Smith, First I applaud you! Then, pension managers would welcome the services of gentlemen, such as you, to guide them in the selection of the products they choose. There are probably a few more of you out there with the requisite morality who can create a consulting business to serve the greater good!

[lsejs]

First off, without both sides of the story it is not journalism. It's little more than a book promo. 60 Minutes should have waited for Goldman's response. It's not unreasonable that they would decline to comment before reading the book. Of course that would have required 60 Minutes to air the story at least one week later. But journalistically it would have been the proper thing to do.

Now to Mr Smith. Is it not an egregious example of his own personal greed that in the midst of the financial crisis and company layoffs he sought to double his already inordinate salary? It really irks me when people (on Wall Street in particular) fail to look at the big picture, but instead focus on their own personal agendas. If indeed he did care more about clients than did his GS cohorts, then he should have "felt their pain" more acutely. Their big losses should have put into perspective his own good fortune. So many have suffered these past few years. Yet this insufferable, whiny millionaire pulling $500k/yr grabs headlines with his self-righteous indignation. It's downright offensive.

A handful of instances of unflattering, questionable, but (as far as we know) not illegal behavior do not warrant the demonization of an entire company. No organization is perfect; neither are human beings. His presumption that the company heads lack proper long-term goals smacks of arrogance and immaturity. For he himself was simply not in a position to get a truly expansive view of this large, complex corporation. Nevertheless there were internal channels whereby he could (even anonymously) express his concerns. But he told no one and instead took a splashy, star-making route.

So just how deep and valuable is his insight? If early book reviews are any indication, he has made a pretty flimsy case for himself.

[bsc36]

Isejs...so how big is your Muppet bonus going to be this year?

[lsejs]

Zero. But I don't whine about it.

[bsc36]

Isejs...what if he's not just whining but telling the truth?

You said you get "irked" when people like Greg Smith fail to see the big picture. Enlighten me...what is the "big picture" on Wall Street? Greed, fraud, arrogance, crony capitalism...Goldman is just smarter and a little more thoughtful in how it executes this "big picture" while pouring honey in the ears of it's Muppets.

You say that no organization is perfect...that's true...but the climate, culture and attitudes on Wall Street are so unique, foreign and repulsive to the average American that you can't compare a Wall Street firm to any other organization (at least legal organizations).

[lsejs]

You want perspective? Here you go:

Does the name "Lehman Brothers" ring a bell? This 158-year-old company disappeared, literally, overnight. Why? Because it was knee deep in toxic assets and used fraudulent accounting to cover it up. Thousands of innocent employees lost their jobs, insurance, retirement savings. In its wake Lehman left shattered lives and financial ruin. Instead of giving Greg Smith the royal treatment, Anderson and his producers should spotlight real victims such as these.

Fannie Mae was the main culprit in the housing crisis. AIG nearly brought the country to its knees. So why have these stories fallen off the radar? Because the media dropped the ball, that's why. More diligence on their part could have by now resulted in guilty parties being led away in handcuffs.

My point is, whatever Goldman's mistakes and misdeeds are, they pale in comparison to the financial wreckage, or potential wreckage, caused by others. Goldman weathered the storm and came out on top. And everyone likes to take a shot at the top dog. It's human nature. But Mr. Smith's blanket indictment, in my opinion, is unwarranted and presumptuous. He was not a manager; he was not part of the decision-making process; he was not part of the upper echelon that set the most important policies; he had never attended a board meeting. From his London trading desk he saw some things that troubled him. But he could not have possibly known in depth what was happening in other parts of the company or in other parts of the world: in banking, asset management, mergers and acquisitions, lending, equity research, credit research. And just how much could he have known about the operations in Asia, South America, or the Middle East? Furthermore, he could at least give Goldman some credit for their extensive charitable work. (Did he himself give back?)

Mr. Smith is a fortunate man. Unlike tens of thousands of people who lost jobs in the industry, he walked away, in his words, with "freedom in my heart." (And no doubt with a 401(k) safeguarded by Goldman.) He also had a $1.5 million book deal for ratting out the employer who had made him a millionaire. On the other hand, had he stayed, he could have looked forward to many more years of a $500k+ salary, plus bonuses. And the expectation of eventually becoming a managing director, even partner. He could have settled into a life of security and comfort.

The victims of Lehman will never have such a golden opportunity.

[sandiegolynn]

Ethics Schmethics! I had a twenty year career in the financial services industry. Durng the early years I had heard investors referred to durogatively as sheep who couldn't think for themselves. I hated the way investors were talked about by sales managers. The pricing/commission on products in my day was written in ways investors could never understand and so paid exhorbitant and unnessary fees. So nowadays the terminology changed but the attitude has not. No matter which firm I went with I observed shenanigans. One firm had an offsite 'division' that few knew about and was rarely referred to. When it was obvious I was not part of that 'club' I was not privy to its progress. It was a think tank of techies who were instructed to find ways to make money off of customers personal and credit information. Another firm used an international bank and funneled money offshore. One firm would create and operate under corporate entities, run up credit and then move on to a new tax ID leaving creditors high and dry. I and others reported problems to regulators who did nothing about the real problems. Instead they would turn their attention and audits to ridiculous licensing or operational issues. I was shocked. Corporate executives would mock the regulators saying things like, those that can't make it in financial services become regulators. When I began to climb the corporate ladder my eyes were opened more and more. I made the commitment that I would remain in the industry until I had to personaly compromise my ethics. It was only a matter of time. When the time came, instead of doing what I knew was morally and legally wrong I quit. Like you, I wanted to whistle blow and write a book. I would have called it INSECURITIES - what investors need to know about brokerage firms, Initial Public Offerings (IPO's) and other shenanigins in the industry. After quitting do you know what I find? Nothing changes. The industry spits out those that don't conform and just keeps going. There are always replacements. It's a big money machine. People who leave it might get some press or interest but nothing changes. And the people who leave the industry simply find themselves on the outside. I have been out of the industry more than a decade now. I am not surprised that someone wants to make a headline out of financial services misconduct. Don't be surprised if interest is short lived and has no ripple effect.

[UncensoredFinancialNews]

While time passes... millions of Americans cannot forget how this type of superior attitude passes all moral understanding. How many Americans lost their jobs and homes from the sale of falsified MERS documents, Wall street firms selling MBS crap, CDO's, Credit Default Swaps, Derivatives without full disclosure of what was being sold. I'll bet you a million dollars that if you were to have PHD's in math ask detailed questions of every licensed employee who sold a derivative to an American pension fund, you would find 99% of these morally deficient salesman would fail the test. That is why... we are soon shooting the television pilot for the Uncensored Financial News Show in Studio City, CA. We have been accumulating video interviews and we applaud 60 minutes for their honest journalism in exposing what America needs to see and hear. Anderson Cooper, Scott Pelley, Laura, Steve, the late Mike Wallace, Morley Safer, the late Ed Bradley and the others not mentioned are my heroes.

[ladybkp]

Thank God for Greg Smith. It is not hard to have integrity and he exemplifies it. Thank you very much.

[njcitizen05]

The world needs more ethical people like Greg Smith. It's seems ethics no longer exists in the financial industry and government and law enforcement are unable or unwilling to do anything. I personally reported a CPA that works for a large accounting firm to the state of New Jersey and also the AICPA (American Institute of Certified Public Accountants), this CPA had committed serious financial fraud that was affecting people financially. The state board and AICPA did nothing and the CPA continues to hold a license and is still a member of the AICPA, they continue to hold a directors position at the same large accounting firm. Thank you Mr. Smith for being ethical.

[XRayD211]

So, 60 Mins finds this ex-Wall Street guy who is professor who says that Goldman will not be trouble by Smith's book, because there is "no evidence of fraud in it."

In the very next sentence he agrees with the interviewer that GS was selling complex products to money managers who did not understand them - (the guys in London said they did NOT trust GS but would continue to do business with them)- so if you are a dummy, no one can perpetrate a fraud on you. They will wine and dine you, dazzle you with the promise of above market returns, and disclose their intentions in a prospectus drafter by GS lawyers, and "AAA" rated by rating firms who get paid to do it.

This is the Wall Street game - and it continues today. It also pretends to be Economics 101, the Free Market, and Capitalism!

[kafir911]

Wasn't it CBS's beloved president who bailed out Goldman Sachs?

http://www.canadafreepress.com/index.php/article/22501

[Lerianis4]

With no other choice if he didn't want the economy to crash and burn. It's like telling someone "Get in there and fix that engine that is on fire!" in a plane when there are no parachutes left. You either fix the engine or you die.