Exporting the Culture of Corruption

“Why I Am Leaving Goldman Sachs” is a topic that former employee Greg Smith explores in a New York Times op-ed. According to the bio underneath the article, “Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa:”


I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival.

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.


“Which Is How You End Up Selling Them Fraudulent Derivatives,” Orrin Judd writes, summing up the culture of corruption that Smith describes at his former employer.

You know what else looks fantastic on your resume at Goldman? Working for the Obama administration, as this chart found at the Clockwork Conservative blog spotlights:

To accompany the above chart, Clockwork Conservative wrote:

Judge Andrew Napolitano (Fox News contributor if you are keeping score) posted an interesting graphic on Facebook detailing where Wall Street influence seems quite prevalent.

Despite their public vilification of financial institutions and their managers, Obama’s administration seems quite comfortable having them in their midst.  The Executive Branch is fairly infested by Goldman Sachs personnel.

As part of the bailout of AIG, Goldman Sachs received over $12 billion in taxpayer funds; ostensibly to prop up the weakened financial sector and failing American economy.  Almost half of the money then flowed to more than 30 other organizations, many of which were overseas.  To add insult to injury, Goldman Sachs announced this year that it would lay off over 1000 Americans as it shifts some operations to Singapore.  The savings will be at least a billion dollars next year.  This is after the company reported a $2.3 billion profit in just the first three-quarters of this year.

If you have read here for any time at all, you know that I am a vocal champion of free market capitalism.  Hearing me, the occupiers would shout back that the Goldman Sachs story illustrates why the capitalist system is a failure and must be destroyed.  But, I argue that this is NOT capitalism.  This is cronyism bordering on socialism.  The revolving door of corporate insiders through policy making and regulatory positions enables a pattern of systematic favoritism.  Add to that the tremendous influence bought by copious campaign contributions by Goldman Sachs and other big financial firms.  With these forces at play, the government finds itself into a position where it can and does choose which businesses will fail or succeed.  This is what is broken.


In October of 2008, blogger Jeff Dobbs (who created the “President Goldman Sachs” Photoshop that Instapundit ran numerous times this past fall during the Occupoopers’ initial rampage) warned of what was to come, and the soon-to-be emperor’s naked hypocrisy whenever he rails against Wall Street and Big Business:

Hot Air points us to a CBS report on Obama’s fundraising. Ed Morrissey notes:

However, they did a good job in reporting the fact that Obama likes to rail about Wall Street greed but uses bundlers right out of Goldman Sachs. The disparity in fundraising between McCain and Obama with these well-connected Wall Street firms is eye-opening.


Let’s go to the effort to do a little transcription work on that CBS video at Hot Air:

Sharyl Attkisson, CBS Correspondent: Like McCain, Obama’s corporate donor list reads like a who’s who of the Wall Street collapse, only some are giving more to Obama. Lots more.

Sheila Krumholz, Center for Responsive Politics: The Obama campaign has just vacuumed up the money in this cycle. Specifically from Goldman Sachs, Obama has received over $740,000 as compared to McCain’s $220,000.

Attkisson: Not to mention that the former head of Goldman Sachs, Robert Rubin, is Obama’s chief economic adviser, and two current executives are bundling for him. Bundlers are mega-fundraisers who critics say get special access.


And it goes beyond the White House and Goldman, of course. Recall former New Jersey Governor Jon “I simply do not know where the money is” Corzine’s meltdown at MF Global, which Walter Russell Mead described last November as “Another Black Eye for Blue Wall Street:”

Blue Wall Street is a major force in the Democratic Party; indeed, the Democrats couldn’t survive without it.  This is not just because of the campaign contributions, pleasant as those are.  It is also about ideas and policy: Blue Wall Street understands how Democratic aspirations (like mass home ownership) can be achieved through the financial markets — for a while at least.  It will be Blue Wall Street that floats the bond issues that keep debt-bedraggled cities and states functioning.  And in New York, it is Blue Wall Street that pays the taxes and provides the jobs that keep Gotham from Detroit style decay.

The Democrats can bark at Blue Wall Street, but they cannot really bite.  A few little puppy nips, perhaps, but any efforts by the Democrats to throw Wall Street under the bus will fail.  Blue Wall Street is the bus, and it refuses to roll over itself.

Could what a former executive of Goldman describes as the “decline in the firm’s moral fiber” spread even further around the globe? As Glenn Reynolds noted last fall, “So America has a President Goldman Sachs, Italy has a Prime Minister Goldman Sachs, and the European Central Bank will now be headed by a former Goldman Sachs banker.”


As Glenn asks, “What could go wrong?”

Well, even more so than it has.

Update: “Why I am leaving the Empire, by Darth Vader.” Presumably, George Lucas would approve of the tacit Obama=Palpatine connection, right?

And at the Washington Post, former PJM colleague Jennifer Rubin describes Smith’s original op-ed as “victimology to the nth degree. He’s made gazillion dollars and now has decided its beneath him. And for this he gets space in The Gray Lady. I can hardly wait for President Obama to call him and tell him his parents should be proud of him.”

Wouldn’t Obama have Corzine or Rahm do it for him?


Trending on PJ Media Videos

Join the conversation as a VIP Member