The Public Trial of Goldman Sachs
Photo Credit: Shutterstock
Stay up to date with the latest headlines via email.
Goldman Sachs is having a bad PR moment. Very bad. And you can bet that the investment banking giant is right now tapping its vast resources to counter the tide. The frenzy centers on an entry and an exit.
Entering: Jeffrey Verschleiser, former Bear Stearns executive and emblem of Wall Street excess and corruption, who will join Goldman as global head of mortgage trading.
Exiting: Greg Smith, executive director of Goldman Sachs’ U.S. equity derivatives business in Europe, the Middle East and Africa, who has resigned in protest of the company’s culture of toxic greed and published his reasons in a New York Times op ed.
This tale of coming and going, and the public reaction, speaks volumes of the power of Goldman Sachs and the public rage over its ethical lapses. Which will speak louder? The answer will serve as a barometer to how far America has come in challenging a destructive financial system.
The Devil’s Work
Back in 2009, Rolling Stone’s Matt Taibbi launched the key media indictment of the mega bank’s excesses, famously dubbing the firm a “blood-sucking vampire squid.” Taibbi unsparingly detailed the vast economic and political power of Goldman and its history of destructive market manipulation that helped devastate the world economy in the 2008 financial crisis.
Taibbi’s story involved some of the most influential men in recent U.S. history, including Hank Paulson, Robert Rubin, and other members of a privileged fraternity of Goldman-affiliated players whom he called out as political puppeteers working on behalf of a corrupt financial industry. It was a tale of greed triumphing over democracy. Goldman Sachs was the predator, and we the people, our money sucked away in a “giant pump-and-dump scam,” were the broke and bewildered prey.
Taibbi was vilified by many members of the press for his audacity, and it wasn’t just the conservative press that pounced. Tim Fernholtz accused Taibbi of lying and called the piece a “conspiracy theorist's dream” in the liberal American Prospect.
A few voices came to Taibbi’s defense, including economist Rob Johnson, who published his reaction on a blog I edited at that time. Johnson pointed out that Taibbi’s article would “surely be discounted by some as hysterical or exaggerated, particularly by those whose senses are deadened by the business press or CNBC-style babble.” But Johnson felt that Taibbi’s outrage was more than justified:
“He is screaming in a way that a healthy press would do in a hysterical time. Goldman Sachs’ uncontested success blurring the boundaries between market and state is symbolic of a tremendous malfunction in finance, politics and civil society.”
The Goldman apologists might dismiss Taibbi as hysterical. But it was a little harder to wave away the condemnation that appeared in the New York Times this week from a man who worked at the firm for 12 years before quitting because he could no longer tolerate what he described as a culture as “toxic and destructive as I have ever seen it.”
Greg Smith came to Goldman as a college intern and over the years has helped recruit students to join the firm. But after 12 years, he found himself working for a company that had become so blinded with greed its clients were no longer there to be served, but to be duped, profited from and disparaged. 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 e-mails.”