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Greg Smith is a Stanford graduate who worked in the New York office of Goldman Sachs before moving to London.
Smith grew up in a middle class family in Johannesburg in South Africa before moving to the US. His father was a pharmacist and his mother is thought to have been a housewife.
He went to King David School in the Linksfield area of Johannesburg, which is a private school for Jewish families.
Smith studied economics for four years at Stanford University and graduated in 2001. He had been working at Goldman Sachs for 12 years. Now he quit with an open letter which discribes very critical how employees measure success on how well they can take advantage of their clients' trust.
This is by far not the first time the integrity of Goldman Sachs has been called into question. It was widely implicated in the global financial crisis. In a civil lawsuit, the US Securities and Exchange Commission claimed that in 2006 Goldman created and marketed a product based around doomed sub-prime mortgages and sold it to investors, earning $1 billion.
The company was accused of failing to disclose to investors key information on the product - including that it had bet against it - and its worrisome risks. As the housing market began to fall, Goldman Sachs reaped the benefits and profits soared.
But the collapse in value of these mortgage-backed securities played a major role in the financial meltdown of 2008.
As many individual investors and pension funds had invested in the packaged products, risk was spread throughout the economy. As it was not clear exactly what bad debts were being packaged and sold, banks became apprehensive about lending to each other in fear they would be lumped with a bad deal. The government was forced to lend banks money to restore liquidity.
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| “A little thieving is a dangerous art, But thieving largely is a noble part; As vile to rob a hen-roost of a hen, But stealing largely makes us gentlemen.” |
Goldman Sachs, which settled the civil suit for $550 million, was also accused of withholding information from clients in 2010.
During the crisis in 2009 Goldman Sachs got the unpleasant nickname "Vampire Squid". The Rolling Stone Magazine posted an article where the author writes:
The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who's Who of Goldman Sachs graduates.
So much for the history of the man and the firm he worked for. Smith writes in his open letter: "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 over internal e-mail." Smith has received strong support from many of his friends and colleagues, who have called him a 'legend' and praised him for speaking up against the corporate culture.
A male friend, who declined to be named, said: ‘I’m guessing he’s got some money saved up but not millions. I can’t imagine he is going to get a job working for any of the big banks after this either. ‘He’s thrown his career away for his principles. I admire the man and I admire his courage, but there is no way I’d do it myself’.
Since the letter was published on that Wednesday morning, Goldman Sachs shares are down by 3.35 per cent to $120.37 a share in afternoon trading.
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But of course Goldman's management claim that the views of Mr Smith represents a minority opinion at the firm.The firm writes: 'We are far from perfect, but where the firm has seen a problem, we've responded to it seriously and substantively. And we have demonstrated that fact. We were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients. It is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm.
It is more than obvious that Goldman Sachs has problems with its image. The only question I have, is why Smith did not leave during the crisis. Why did he stay? Because of money? If Greg Smith had his eyes truly open, he would have had the same issues six years ago as he has now.
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