In the autumn of 2009, during a period of profound uncertainty, the head of Goldman Sachs, Lloyd Blankfein, made an audacious claim to The Times of London, asserting that his bank was performing “God’s work.” At that moment, many were left puzzled by his self-aggrandizing statement.
It seemed that Blankfein believed his firm was expertly directing capital to its most valuable uses, considering this to be divine duty. Whether this perception was accurate is debatable. However, we previously explored this notion in an essay titled, Hell To Pay, where we shared insights into how he might have arrived at such a conclusion.
We posited that certain fundamental principles govern the world, and there are repercussions for disregarding them. For instance, one cannot obtain something for nothing; artificially maintaining low interest rates distorts the economy; and, importantly, a fool and his money are soon separated.
To acknowledge these basic rules is to recognize an inherent moral and natural order to existence. Thus, we concluded that Blankfein’s assertion about providing divine service held some truth—by parting fools from their finances, Goldman Sachs was indeed engaged in “God’s work.”
But that was the past; now we are in a different time…
A Critical Look at Goldman Sachs
One of life’s unexpected pleasures, beyond mere survival, is the rare opportunity to witness the self-importance of the elite laid bare, particularly when it is met with criticism. This past Wednesday, Greg Smith provided such a moment, airing his grievances against Goldman Sachs in a New York Times op-ed.
In his piece, titled Why I Am Leaving Goldman Sachs, Smith, a longtime employee, announced his resignation. Here are some of his key observations:
“Today is my last day at Goldman Sachs,” he began. “After nearly 12 years with the firm, I believe I have gained enough insight into its culture, its people, and its identity. I can honestly say that the current environment is more toxic and destructive than I have ever witnessed. To put it plainly, client interests are increasingly sidelined in how the firm thinks about generating profits.
“In derivatives sales meetings, not a moment is spent discussing how we can assist clients. It’s solely focused on how to maximize profit from them. It makes me ill to hear people casually discuss ways to deceive their clients. Over the past year, I’ve heard five different managing directors refer to their own clients as ‘muppets.’
“Goldman Sachs has shifted too much toward shortcuts and away from genuineachievement. It no longer feels right to me. Those who are guided solely by a desire for profit cannot maintain this firm—or the trust of its clients—for very long.”
Profits at the Expense of the American Public
It’s clear that Smith is onto something significant. From our vantage point, the culture at Goldman Sachs appeared deeply flawed. However, Smith’s firsthand account sheds much-needed light on the issues at play.
While exploiting private clients is both unethical and unwise, it remains the firm’s prerogative. Clients, too, have the right to withdraw their business if they feel wronged. Just as we would take our cars to another mechanic if found to be cheated, clients of Goldman Sachs should do the same.
What truly raises concerns, however, is that during the financial crisis of 2008, Goldman Sachs received a significant bailout of $14 billion through AIG, thanks to taxpayer funds. Without this governmental support, it’s plausible that Goldman Sachs may have ceased to exist.
Fast forward to the end of 2010, and Goldman Sachs reported almost $22 billion in profits over the preceding two years, during which they disbursed over $31.6 billion in employee compensation. This illustrates that Goldman Sachs not only profited from their clients but also capitalized on the support of every American.
Unfortunately for taxpayers, their financial backing of Goldman Sachs was not optional—it was compulsory.
Sincerely,
MN Gordon
for Economic Prism
Return from Compulsory Profits Off the Back of Every American to Economic Prism