Goldman Sachs' Tell-All Tells Little
It was an enticing tease, a resignation letter published in the Op-Ed pages of the New York Times.
In it Greg Smith told the world why he was leaving Goldman Sachs, an investment bank that prizes its privacy and the loyalty and discretion of current and former employees. But after following the bank's rules for twelve years, Smith broke one of the most sacred, parting the curtains to give the public a look inside the legendary investment bank.
After the headline broke in March, Smith went underground, promising to say more in a book released Monday. "Why I Left Goldman Sachs" offers few if any jaw-dropping moments. It is a well written account of a young man's growing disillusionment with a company he thought was better than he came to see it as being. This is probably a relief for Goldman and a disappointment to its critics. But for those unfamiliar with Wall Street, the book is likely to reinforce its image as a money hungry culture geared toward enriching the banks rather than helping clients.
"Absolutely banks should be in the business of capitalism and making money, " Smith said in an interview on NBC's Today Show. "But I think capitalism doesn't need to come with unethical behavior. And I think once you start seeing unethical things I think that's when you have to say 'you know what, this is not acceptable.'"
The book follows the arc of Smith's career at Goldman, from poorly dressed summer intern, to a gratuitous hot-tub scene in Las Vegas for a colleague's bachelor party, to his final stint as a derivatives salesman in London.
He admits to drinking the company Kool-Aid, assuming the thousands of employees who worked around him believed steadfastly the client came first and that the firm's long term success depended on how well they treated those clients.
It turns out, Smith saw too many examples of employees working in their own self-interest or the firm's rather than the clients.
These instances include a manager who takes a cut of a trader's revenue for herself to boost her year-end bonus, a young trader who gleefully overcharges a client $1.5 million on a trade, and a hot-shot trader who cuts corners in explaining complex, big-fee trades he executes for clients.
None of these actions may land a person in jail, but Smith finds the lack of pushback on bad behavior discouraging enough to make him quit. (Read More: It's Not Just Goldman Sachs)
"I would like Goldman and the rest of Wall Street to actually address the issues," he said on the Today Show. "Are clients being ripped off? Is the bank betting against clients with their own money? And what I'd like to know and what I write about in the book is since the crisis, none of these problems have been fixed." (Read More: Goldman Sachs' 'Jerry Maguire' Moment)
Goldman Sachs saw Smith's book as a pending crisis and undertook an internal investigation to determine if the rampant disregard, and use of the term "muppet" for unsophisticated clients was as widespread as Smith alleged. Goldman found little evidence of clients being referred to as "muppets" in emails, but did point out Smith's peer reviews determined he was a "below average" employee. (Read More: Anonymous Source Belittles Goldman Exec)
Smith did not see himself that way. He depicts himself in the book as a standard bearer for Goldman's culture, or rather past culture. Ultimately, it was a burden too big for him to bear.
-By CNBC's Mary Thompson