The bad news is it will probably be a temporary loss and will do little to change the ethical climate at Goldman Sachs or in the larger world of Wall Street. Pirates are a hard bunch to reform.
Greg Smith is the 33-year-old, London-based head of Goldman Sachs’ overseas equity derivatives business who quit his job just minutes before his explosive Op-Ed article appeared in Wednesday’s New York Times. In his piece, Smith wrote, “It makes me ill how callously people still talk about ripping off clients.”
Smith describes the various ways many of his colleagues undercut the interests of investors in order to make more money for themselves and the company. He said he could no longer stomach the prevalent ethic that making gobs of money by any means was perfectly fine and highly rewarded, so he jumped ship, simultaneously sinking his own future in the financial business.
Smith’s revelations are no big surprise to critics of the big banks and financial firms. What is significant is that the criticism comes from an insider who was part of the greed machine.
There are already those who are saying: So what? Isn’t making money the whole purpose of capitalism?
Yes, it is. But there is more than one way to make money. Earlier in the Republican presidential primary campaign, none other than Newt Gingrich made a distinction between those who risk their own money and put in the sweat and toil to build their own enterprises and those who use other people’s money to get rich by picking apart the assets of troubled companies. Texas Gov. Rick Perry capped this debate – which, of course, was an attack on Mitt Romney’s activities with Bain Capital – by coming up with the term “vulture capitalism” to label what Gingrich was talking about.
It is vulture capitalism that drove the country to the edge of financial disaster in 2008. Back then, I had a conversation with a friend of mine who was disgusted by it all. He insisted that the core purpose of business is to serve customers and the community, not merely make fortunes for Wall Street players who trade in exotic financial schemes that build nothing and create no jobs.
Now, my friend is not a left-winger who hates free enterprise. He is a Republican, a devout Christian and a smart entrepreneur who has run two successful businesses. His point is that if a business does right by customers, the money will follow, but if greed is the only motivation, customers, community and maybe even the country will suffer. Sure, someone can make a lot of money by looking out for no one but himself, but he will have betrayed the higher spirit of capitalism.
Greg Smith may never make the big bucks again now that he has ratted on Goldman Sachs, but at least he’ll be rich in the one thing Wall Street needs as much as money: integrity.