Goldman Sachs has been getting a string of bad publicity recently, with former Goldman board member Rajat Gupta being sentenced to two years in prison for insider trading. And in March, London executive Greg Smith resigned in an op-ed in The New York Times, where he accused the company of corruption.
Smith, who started as an intern at the firm in 2000, worked him way up to a position as a vice president before ending his 12-year career in spectacular fashion. His subsequent tell-all book, “Why I Left Goldman Sachs: A Wall Street Story” comes out this week. Greg Smith comes to “Starting Point” with more on his story.
Smith sheds light on some of the practices at Goldman Sachs and why left. “At Goldman Sachs, there’s a term a called an ‘elephant trade,’ which is when you make $1 million dollars or more on one single piece of business on one hit,” Smith describes. “And the mentality is purely about ‘eat what you kill’, getting big business.”
Smith opens up about what the bankers target in these elephant trades. “The easiest big business comes from unsophisticated investors, which is very frequently a teacher’s retirement fund, philanthropy, a charity, a university endowment. And if banks were forced to make their earnings transparent, and show who they made money from and how they made it, people would be outraged, frankly.”
Soledad O’Brien asks Smith if he is what the firm now paints him out to be: A disgruntled employee who failed to receive the bonus he wanted and revolted. Smith says he would have behaved the same way had he received a better bonus. “You are buying into a character assessment without asking Goldman the hard questions,” he tells her. “Why don’t you ask Goldman to release all the emails that were sent in the year before I left that said what a terrific job I was doing? So this idea of trying to smear me, in a sense avoids the real issue. Are you ripping off teachers’ pension funds? Are you selling clients products that are under standard? And are you still betting against clients?”
Smith also says that the federal government’s crackdown has failed to affect Wall Street because of its extreme influence in Washington. “Wall Street has spent $300 million dollars lobbying against Dodd-Frank, and less than one-third of the bill has been implemented, and three-quarters of the deadlines have been missed.” He also mentions a “huge revolving-door problem between Washington and Wall Street”, naming critical figures linked between Wall Street and politics.
Having blown the whistle on investment banking, O’Brien asks Smith what his next career move might be now. Smith says he’s not ‘anti Wall Street,’ and he wants to reform it as someone who knows how it works. “The job I take next is I want to advocate loudly for financial reform.”
Starting Point airs weekdays from 7am to 9am ET on CNN. Check in often to join the daily conversation.