Yet again, Goldman Sachs has seen its reputation plummet in the public eye. A scathing resignation letter-cum-opinion piece by a disgruntled midlevel executive published in Wednesday’s New York Times quickly went viral and was the talk of the financial town. And it was quite the letter, filled with accusations of a “toxic and destructive” culture, of executives expressing unmitigated scorn for clients, including referring to hapless ones as “muppets,” and general disdain for anything except profit and more profit, whatever the ethical or moral costs.
It was a letter replete with disillusionment. But truly, could one have any illusions left about Goldman and other top investment banks, given the past five years of financial panic and scandal? Given the revelations about dubious structured products built on the shaky foundations of subprime mortgages and derivatives too complex for the derivers to comprehend? Given the fines levied and paid, by Goldman, yes, and by others? Given the collapse of Lehman and Bear Stearns and nearly the entire financial edifice, as well as the more recent implosion of European banks and their massive holdings of dubious sovereign debt? And given the legacy, long before then, of bonuses worthy of Croesus in a world of quotidian pay raises for the 99 percent?
And even granting—as it should be granted, and as too few critics have—that these companies, with their hundreds of thousands of employees, are undoubtedly staffed by many decent people, working hard, doing their best, ambitious, intelligent, creative, diligent, serving the interests of clients as well as themselves, even granting that, how could it have come as a shock to Greg Smith, the Goldman executive resigning in such spectacular high dudgeon, that his chosen profession might have attracted some who were somewhat less honorable and somewhat more dismissive, disdainful, and greedy?
This is one of those moments well served by cliché: should we be shocked by gambling…in Casablanca, no less? Should we be alarmed and surprised that in a company that leads an industry that has been reviled and held in little public repute in the United States or across the Atlantic, where Mr. Smith was stationed, employee morale has declined and so, perhaps, have standards? Should we be surprised that in an industry now so disdained and held responsible for so much general misery (and yes, even scapegoated beyond what it has deserved while others have escaped public calumny) many might have dropped entirely the facade of serving clients and facilitating the wheels of commerce and instead embraced a cynical stance that we are all, in the end, in it for ourselves and looking our for No. 1?
In their internal response to the letter, Goldman CEO Lloyd Blankfein and President Gary Cohn expressed dismay that one of their own had aired dirty laundry so publicly and commiserated with the rest of Goldman’s 30,000 global employees. “It is unfortunate that all of you who worked so hard through a difficult environment over the last few years now have to respond to this,” they concluded. “But our response is best demonstrated in how we really work with and help our clients through our commitment to their long-term interests. That priority has distinguished us in the past, through the financial crisis and today.”
Those are honorable sentiments, but they may well represent an ideal not ever much lived, and if Mr. Smith is to be believed, not much lived at all inside Goldman today. Most of his op-ed rings true, except for this: the shock and disillusionment. What profession did he think he was entering? Social work?
This is not to say we should not hold ourselves and our institutions to standards of integrity and respect. But I’m sure Apple engineers privately express scorn for many of their suppliers on coffee breaks in Cupertino, and I doubt you’d want to read what they used to snicker when the subject of BlackBerry came up. Google programmers likely do not lavish praise on those they find inept, whether clients or colleagues; and let’s not even start on lawyers or politicians, whose private utterances about friends and colleagues we would not always wish on our enemies. People can be startlingly crude and cruel; Wall Street and Goldman have no monopoly, and nor should they be held to a higher standard. A standard, sure, but let’s be real.
Finally, this has become the proverbial dead horse. Our economic problems—or those of the United Kingdom, where Mr. Smith resided—will not be solved by Goldman-bashing or outrage at Wall Street. They were not responsible for Greek debt or for subdivisions in Las Vegas. They were not to blame for shifting patterns of global commerce or technology-enhanced productivity that causes such dislocations in Ohio or Michigan. They have played their part in the housing excesses and the financial panic of recent years, but further humbling Goldman or dismantling it would do little more than satisfy the bloodlust of angry millions whose only other outlet for frustration is at the polls this November.
We will not build a New Economy by pulling Wall Street further down. Creative destruction requires the former and not just the latter. The glee and chortling that greeted Mr. Smith is a sign of bitterness and a focus on the past rather than the future. So the mighty have fallen, so what? Time to move on to the hard work of what we will all do to create a sustainable economy, and let us hope Mr. Smith joins that work.