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The Goldman op-ed: Is what Greg Smith said true?

People gather outside Goldman Sachs headquarters in New York City. Greg Smith, a former Goldman Sachs executive directo, wrote a scathing op-ed about the company while resigning. We dissect his op-ed and discuss what everyday Americans should think of Wall Street now.

Kai Ryssdal: First of all, I'm kidding. Not leaving. Second of all, if I were, what a way to go out, right? A guy named Greg Smith -- who until today worked at Goldman Sachs -- did the print equivalent of the same thing this morning. Quit, very publicly, blasting his former employer in the process. In an op-ed in the New York Times, Smith said -- among other things -- that Goldman is toxic and destructive. That it puts profits ahead of clients, you get the picture. Pretty much burned that bridge right down. We're gonna take a minute and dissect what Smith said -- and how true it might be -- with Barry Ritholz. He's the CEO at Fusion IQ. And Josh Brown of Fusion Analytics and a regular on our morning show. Guys, good to have you here.

Barry Ritholtz: Thanks for having us.

Josh Brown: Thank you.

Ryssdal: So Josh, I heard you on the Morning Report this morning with Jeremy Hobson talking about this thing. You basically said, 'You know what, this is the Wall Street culture. Get over it.' Really?

Brown: Yeah, really. Well, I think the op-ed itself was a little bit inflamed and overly dramatic. I think the vast majority of people that work at Goldman Sachs are good people who are trying to do the best they can. It's not necessarily a culture where they want to rip everyone's throats out.

Ryssdal: Barry, what's your sense?

Ritholtz: I take a little longer view. And remember the days when... First of all, it's not just Goldman Sachs. It's Goldman, it's Merrill, it's Morgan, UBS. It's all the big shots. And second, the change that really dramatically altered the cultures took place when they went from partnerships to publicly-traded companies. And once you're a public firm, well guess what, the number for the quarter drives everything else into a secondary position. Gotta make your revenue numbers, gotta hit your earnings, go, go, go. Whatever you gotta do. And that's how you end up with a culture that places a high value on ripping the client's eyeballs out.

Ryssdal: Josh Brown, let me pick up on that. Not that image, but that idea. Isn't it in the firm's best interest to take care of its clients, and doesn't that give lie to the whole Goldman ethos?

Brown: Yes, and I think it's important that we don't talk about Goldman like it's a monolithic firm and they're only in one line of business. It's not like Ford where they just make cars. Goldman's got areas of the business where it's very important where they execute and take care of the clients. But then there are other parts of the firm where they're moving and shaking with assets that are going from one balance sheet to the next and they're trading as a principal against their actual clients.

Ryssdal: Josh, let me ask you to give Barry a poke in the eye here for a second, and ask you if what he's saying isn't a little bit of false romanticism here. He wrote this morning about how guys used to tell great stories and it's camaraderie and mentoring and taking care of each other.

Brown: I still think that exists today. I think that you had a culture where there was a lot more trading and mentorship. But even still, that mentoring was mentoring people to come into their own and become killers.

Ryssdal: There's a whole lot of I'm shocked -- shocked -- to find out this happens on Wall Street in the press today. None of this is new, man. I mean, you go back to Michael Lewis and Salomon Brothers and you're so stupid you could be a client. I mean, this has been around forever.

Brown: That's the point I'm trying to make. It's not like Wall Street was the Girl Scouts and then all of a sudden a switch was flipped. You can go back even further than Michael Lewis in the '80s and the '70s. You could go back 100-some odd years, anyone could get fleeced at any time. So to say that all of a sudden the culture has changed is a little bit naive and a little bit childish, and that's the part of Greg Smith's op-ed that I took exception with.

Ryssdal: Barry, the regular person on the street who is three years out of a financial crisis that almost sunk the entire economy and will read probably the first two paragraphs of Greg Smith's op-ed, if that. What are they supposed to make of Wall Street now?

Ritholtz: It's funny because I've been a vociferous critic of Wall Street and I find myself in the unusual situation of defending some of what the street does that that's right. If we're going to use Goldman as an example, they used to call it: "We're long-term greedy. We want to be greedy, but over a period of decades and grow as the clients become wealthy."

Brown: Hey Kai, I have an iron-clad law of financial products. Brown's law of financial products states that the more you're compensated as the broker to sell something, the worse it is for the client.

Ryssdal: Barry, what about that?

Ritholtz: Remember the great scene in "A League of Their Own" where he says, 'This is a simple game. You hit the ball. You catch the ball. You throw the ball.' Well, Wall Street should be similar. You buy good companies with strong growth and good earnings. You buy high-quality bonds with good dividends and little risk. And you allow time to compound over long periods.

Brown: Yes, but it's way sexier if you don't do that.

Ryssdal: Josh Brown, he's at Fusion Analytics. He blogs at The Reformed Broker and he's a regular on our Wednesday Morning Report with Jeremy Hobson. Barry Ritholtz blogs at The Big Picture. He's the CEO at Fusion IQ. Guys, thanks a lot.

Brown: Bye-bye.

Ritholtz: Our pleasure.

About the author

Kai Ryssdal is the host and senior editor of Marketplace, public radio’s program on business and the economy.
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Great news . I read & appreciated.

What ever happened to 'due diligence'? (Don't tell me it's become fostering the client's delusions.)

One mid-level GS exec leaving with sour grapes is not even close to being so news-worthy. How quickly those of you on the far left, who view yourselves as Progressive and open-minded are to trash an entire organization based on one letter, because it plays so well into your ultra-left fantasy of BIG EVIL Wall St. It also shows how clue-less most people are about who some of the power-brokers are on Wall St. For example, did you know that union pension funds & their execs are some of the most powerful forces on Wall St. Oops, sorry that doesn't fit into your picture, does it? There are plenty of good, ethical, hard-working people at G-S. It's very unfair to trash the whole company based on one guy's opinion.

I was thrilled on Wednesday when Kai opened the evening 30 minute show with the announcement that he was leaving. But alas, it was just another one of Kai's lame attempts at humor.
His smart-aleck style, dumb puns, sarcastic quips, and all too strained reaches for laughs are warring.

Could we get just the facts, the news, and insightful analysis without all the cute stuff?

i suggest you invite someone on your show - say Matt Taibbi - who actually has something intelligent to say about this very important problem that is exploding in front of your very eyes, instead of inviting guys who are blind, 'business as usual' yes men for the financial sector.

i listen to marketplace every day and this interview was SO, SO disappointing. who are these clowns Ritholz and Brown? firstly, this was a huge story for a show that follows the financial industry and it seemed plain lazy that you got two guys from the same company who seem completely captured by the mood inside the wall st bubble. i felt these two guys just did NOT get it. people outside the wall st bubble (like myself) are furious STILL about the bailouts and we're not forgetting it anytime soon. we want some of those guys in jail! they may think OWS has gone quiet but the resentment is still out there for millions like me (who never went to zucotti park but supported OWS strongly). i would say for every OWS protester, they probably represented 100's or 1000's of americans like me who can't just drop everything to go protest. please don't forget that in your broadcasts, Kai. don't be part of the status quo or you are not doing your job as a journalist. i expect better from you.

As along time fan of Marketplace, I was very disappointed that your response to Greg Smith's op-ed missed the opportunity to thoughtfully explore the significant moral and ethical issues raised by the article. Instead listeners got to hear a defense of Wall Street culture and a deflection of any responsibility on the part of Goldman Sachs executives for the firm's policies or culture.
Your listeners deserve a more extensive and thoughtful discussion of this issue that includes people from a much wider range of perspectives than Barry Ritholtz and Josh Brown represent. Your first effort to treat this topic came off sounding too much like part of the Goldman Sachs' damage control campaign than the kind of in-depth journalism we expect from NPR programs. I trust you can and will do better.

could not agree more. this was lazy journalism at it's worst.

Given the nature of banks, and that they deal with the fundamentals of what our society is based on, I think that they should not have tradable stocks. They shouldn't have share holders, and they shouldn't be worried about the end quarter results. I don't mind if they issue bonds, but there are real sociatal negative impacts when they're trying to artificially boost the random number that's their stock value.

simply amazing Evidence on Goldman Sachs selling FAKE stock into pension funds comes out in new documentary just released March 1st, 2012 and should be all over TV and yet the news media is silent on this powerful evidence. www.TheWallStreetConspiracy.com watch the 3 minute official movie trailer just released.

Richard
SiriusNews

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