Gosh Sir – Tell Us Something We Did Not Know
The departure of an executive from a firm like Goldman Sachs is usually not news unless that executive leaves with a blast at the firm and its lack of ethics, as senior executive of Goldman did in an opinion piece in the New York Times. His complaint and concern was that the firm and others like it are no longer interested in pursuing policies for the benefit of their clients, but use the clients to pursue policies for their own enrichment.
The only amazing thing about this story is that it is getting any publicity at all. The fact that Goldman Sachs and its brethren used clients to enrich themselves is not unknown, in fact it is very well known.
Memories are still fresh of the Securities and Exchange Commission lawsuit filed in April 2010 accusing Goldman of fraud, after it sold clients complicated mortgage backed securities that later soured, and never mentioned that it had bet against them.
Goldman of course in implementing this policy and strategy was not the exception, it was the rule as stories of other firms have come to light and settlements have been made without the firms admitting that they did anything wrong.
It didn’t use to be this way, it used to be that Wall Street firms made money by helping clients meet their goals.
Wall Street, of course, has always sought profits — but if greed were to be countenanced, it should be long-term greed, not short-term greed, in the words of Gus Levy, who led Goldman Sachs in the 1960s and ’70s. With long-term greed, money was made with clients, not from them.
Veterans of Goldman and other top-tier firms say there was a time when long-term greed was the order of the day, at least publicly, and it benefited firms and their partners if not enormously, then certainly generously. But over the last 25 years, as that incentive structure metamorphosed, longtime observers say, Wall Street has been remade in ways that Mr. Levy would hardly recognize.
And yes, more regulation and tighter regulation and better regulation is needed for Wall Street. And yes, Wall Street has only itself to blame if that stronger regulation does take place. But the good news for the denizens of finance is that weaker, not stronger regulation is what is likely to happen. But to a great extent that really is not important. Until the ethics of the finance industry change, no amount of regulation will ever prevent firms like Goldman from fleecing their clients. They are just too good at it.