Goldman Sachs – Executive Resigns over Business Practices

Today’s Wall Street headline was the resignation of Goldman Sachs’ Head of Derivatives Business, Greg Smith. Smith, with help of the New York Times, publicized his reasons for resignation. The article describes how Goldman Sachs went from a respected firm to a reckless money maker without any concern towards any client. Smith describes Goldman Sachs as a company that is teaching and practicing business for all the wrong reasons. Goldman’s comment to the claims, “we do not share this opinion” and other popular phrases of no substance.

While all the claims are actually nothing new, Goldman Sachs’ activities are open secrets since the financial bubble busted, it should be mentioned that a huge number of banks in general work in that manner, not only since a couple of years. And there is no difference between an Investment Bank or a Retail Bank. In general, “making money no matter what” has become the major motivation not only in the financial industry. On whether this motivation can be a sustainable business practice seems not to be a question for many corporate leaders.

Smith has a good point in his “resignation letter”, one day the firms that practice such “all or nothing” practices will find themselves with, nothing. Making the bucks on the back of your clients will not go on forever. It will come to the point that people don’t want to do business with such firms. Goldman Sachs will be one of the first that will make this experience. The fact that executives are walking away from the firm is a first sign of what’s to come. That it is not already the case has its reason more in the long reach of the firm and the fact that competitors are not much better. A very sad reason why people do business with a firm. If it ever happens and one of these companies is changing its business model, there is lots of money to make and lots of new clients to acquire. Who has the balls?

Read Why I am leaving Goldman Sachs

4 responses to “Goldman Sachs – Executive Resigns over Business Practices

  1. I spent 8 years as a broker, and I agree that the “whatever it takes” culture that pervades the industry is the source of so much of their troubles.

  2. The question is not who has the balls, but who has the management that will be able to pull this off? Most of the people in management today would much rather go with the flow and not rock the boat, so as to insure their own position is not in jeporady.

    Any company that can find the personel that is willing to lay their own job on the line to insure the company is working in the best interest of the customers instead of the bottom line, is the company that will have the lead in this new age of money managers.

  3. The reckless pursuit of profits have historically been the downfall of businesses and economies alike. The banking changes separating investment banking from retail banking in the wake of the depression have now become completely blurred. The next time a “too big to fail” bank fails, the repercussions will devastate the US economy.

  4. Lots to ponder about in this article. But in my opinion a lot of noise has been generated with respect to what written above but almost every time it dies. And that “one day” when the buck would stop seems like eternity.

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