I was going to write about this piece at the New York Times where this guy called Greg Smith writes about how he's leaving Goldman Sachs because it no longer has the vibrant service culture of putting clients first that it had when he started (no really, stop laughing). He also wrote to say that all you darn kids have no respect any more, and you keep listening to that damn rap music, and back in his day politicians cared about the public interest.
I was going to write about that, but then David at Popehat nailed it so perfectly that you should really just read his post instead. Comedy gold!
Some of the problems Greg Smith describes seem like natural conflicts of interest for a financial services firm. Mostly, they arise because the firm is both advising clients and also trading on its own behalf. For example, the firm apparently pushes investment clients towards assets the firm owns and would like to sell. I saw at least three specific items that were advising-trading conflicts of interest.
ReplyDeleteThis isn't really a problem of altruism versus making money. It's a problem because two lines of business -- advising and trading -- are in conflict. And remember, Goldman has an actual legal obligation to clients in the advising line of business; it isn't a fig-leaf.
With Smith apparently on the advising/client side, he seems to be complaining that the traders have too much power over his relationship with the clients. If this is actually true, it is a problem. It may not be worth an Op-Ed in the NYT, and the unicorns and rainbows thing is silly, but the underlying complaint is understandable.
Totally agree - I think there are significant conflict of interest problems between the advising side and the trading side, just as you note. That's part of the reason I wouldn't listen to Goldman's advice on anything.
ReplyDeleteBut the specific claim he's making is that these problems have gotten significantly worse at Goldman over the past ten years. Now that's something I'm not sure I buy. I believe that Goldman thinks only about Goldman, but I also think that was probably always the case. It's similar to the people that use 'greed' as an explanation for the financial crisis - it's a contributing cause, but doesn't seem a good candidate for explaining the time series.
But the main thing I found funny was not that this guy had complaints about Goldman, but the hilarious and transparently self-serving nature of the whole op-ed. He didn't miss a single chance to list all kinds of irrelevant accomplishments of his (I won a table tennis medal!), and big-note himself as being more trustworthy than the firm he's leaving (Hello, potential clients of Greg Smith Advising LLC!).
Bottom line - I agree with Greg Smith's claim that I shouldn't trust Goldman. I disagree with Greg Smith's implied claim that I should trust Greg Smith.