Last March, Goldman Sachs VP Greg Smith quit his job in spectacular fashion—with a New York Times op-ed decrying the erosion of the firm's moral culture into a "toxic and destructive" state. Now, Greg Smith has a book coming out. He was on 60 Minutes last night. He has become, in mere months, the world's most famous insider critic of the go-go culture of Wall Street's biggest banks.
If you understand how the American news cycle works, you know what is coming next: the (new) backlash against Greg Smith. The inevitable backlash will recast him from heroic whistleblower to self-serving hypocrite. So before that backlash is fully formed, allow us to offer a defense of Greg Smith, and others like him, who assert their moral outrage over bad situations that are ostensibly "well known" even before they raise their voices in protest.
The backlash, of course, is already well under way. The NYT's Andrew Ross Sorkin said he thought Smith "might have conned" the media into paying attention to him, because his book "doesn't say anything particularly revelatory." Nathan Vardi at Forbes dismisses Smith's complaints, saying that clients distrusting their own banks is "precisely what should be happening in financial markets." The NY Daily News complains that Smith's book "failed to make his readers care" about the issues he raises. As Bloomberg View put it in its original snide dismissal of Smith's op-ed, "If you want to dedicate your life to serving humanity, do not go to work for Goldman Sachs."
What bothers most Wall Street-savvy critics about Greg Smith is this: he got a lot of attention for complaining about a situation that all of these Wall Street-savvy people already know exists. Smith's charges were, for them, old news—and worse, they smacked of a naivete about what banks like Goldman Sachs do. These Smith-haters resent the attention he reaped, and charge him with being either stupid, or dishonest about what he was doing for those 12 years he worked at Goldman.
Greg Smith is hardly a revolutionary. Greg Smith may have benefited from the Occupy Wall Street vibe that was in the air when his op-ed dropped, but he is hardly the philosophical equivalent of an Occupier. What is Greg Smith really arguing for? He is arguing for honest banking. By that, I mean that he is arguing that investment banks should work in the best interests of their clients, rather than in their own best interests (which may be detrimental to their clients' interest). "Capitalism should be where everyone competes hard and makes money, in an environment where there is fair play and competitiveness," he says. "Right now the system is stacked against everyone else in favor of the banks."
That's quite simple. A couple of generations ago, before Wall Street became the financial monster that it is today, this would have been considered an unremarkable request. Today, it is considered naive enough to draw invective from many of the journalists who are supposed to be in charge of keeping an eye on Wall Street's excesses. Everybody knows that banks like Goldman will rip off their clients—clients like the pension funds that control your retirement money. Today, enriching themselves at the expense of everyone, including their clients, is considered to be what Wall Street banks do. To betray shock at this fact is considered weak and outlandish. To take Goldman's own "Business Principles" statement, "Our clients' interests always come first," at face value, as Greg Smith says he did, is considered to be more enraging than the bank's own amorality, because it reveals the complainer as a sap, a mark, a sucker. And there is no room for suckers on Wall Street.
I would simply like to assert that, no matter whether or not you believe Greg Smith is a hero or an opportunist, he did what we would all hope that our own banker would do: he spoke out publicly about something that was wrong. The fact that his charges are old news to the Wall Street people, the bankers, the financially savvy, and the media figures that cover them is not an indictment of Greg Smith. It is an indictment of everyone who accepted rapacious amorality as the natural order of things. It is not important whether or not Greg Smith is a hero. What is important is the principle that people in positions of power should not grow so inured to corruption or unfairness or the rotten nature of their particular institution that they accept that state of affairs without question. To understand how something works does not mean that we must lackadaisically assume that it should work that way. And we should never become so cynical that we create an environment in which whistleblowers receive more criticism than the institutions they blow the whistle on.
Everybody knows Wall Street rips off unsophisticated clients as a matter of course. One guy complained about it. That's the problem.
Photo via AP.