Follow us:

Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

March 15, 2012 at 9:55 AM

Goldman’s vocal defector and the need for cops on Wall Street

I’ve self-destructed in many jobs before, but never as publicly or popularly as Greg Smith, who resigned from Goldman Sachs in an op-ed in the New York Times. (I know, I know: Some commenters will say I self-destruct daily in this blog, but hang with me). He decried a culture of “ripping off” clients. “The firm,” he wrote, “has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for.”

Matt Taibbi, who famously wrote that Goldman “is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” might ask, what took this 12-year veteran so long to realize the toxic culture at Goldman and elsewhere. Heidi N. Moore of Marketplace Radio had a more nuanced interpretation:

I see Smith’s self-immolating, public letter of resignation as more about the 99 percent and the 1 percent within Wall Street. It’s the objection of the underclass of younger bankers and traders stymied by a lack of career mobility, suddenly disillusioned, coming to a realization that despite all their hard work, not everyone actually makes it on Wall Street – and “winning,” anyway, may not be a prize worth having if its means making it to the top of a widely-attacked industry and signing on to more of the moral compromises that get others into the corridors of power. As the Wall Street bonus pie shrinks, those internal wars at firms get more and more small and petty – not just between traders and bankers, but trader versus trader and banker versus banker. Smith’s opus falls into this camp.

The reality is that Goldman and its cohorts cooked up the bubble, with its dodgy “investments” (read frauds), that brought the financial system to the edge of collapse and had to be bailed out by American taxpayers and the Federal Reserve, dolling out the future living standards of Americans. And they got away with it. The real causes, especially laissez-faire capitalism, captured regulators and a political system run by money, were quickly rewritten: The collapse was really caused by minorities getting mortgages they didn’t deserve through Freddie and Fannie. So reform was stymied and, as Smith’s op-ed makes plain, nothing has changed. Why, for example, is MF Global’s Jon Corzine still at large?

This is a cry for help: Reinstate Glass-Steagall. Return Wall Street from gambling to the rather dull business of assembling capital for productive, job-creating enterprises, and all overseen by effective regulators. Otherwise, all the public resignations won’t matter. The next bubble of swindles is being cooked even as you read.

And Don’t Miss: What’s wrong with climate-change economics || Environmental Economics

Today’s Econ Haiku:

Apple keeps rising

Wish I’d bought when it was low

There an app for that?

Comments | More in Goldman Sachs, Wall Street


No personal attacks or insults, no hate speech, no profanity. Please keep the conversation civil and help us moderate this thread by reporting any abuse. See our Commenting FAQ.

The opinions expressed in reader comments are those of the author only, and do not reflect the opinions of The Seattle Times.

The Seattle Times

The door is closed, but it's not locked.

Take a minute to subscribe and continue to enjoy The Seattle Times for as little as 99 cents a week.

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited content access is included with most subscriptions.

Subscriber login ►
The Seattle Times

To keep reading, you need a subscription upgrade.

We hope you have enjoyed your complimentary access. For unlimited access, please upgrade your digital subscription.

Call customer service at 1.800.542.0820 for assistance with your upgrade or questions about your subscriber status.

The Seattle Times

To keep reading, you need a subscription.

We hope you have enjoyed your complimentary access. Subscribe now for unlimited access!

Subscription options ►

Already a subscriber?

We've got good news for you. Unlimited content access is included with most subscriptions.

Activate Subscriber Account ►