TODAY | October 27, 2012
>>> you ever wanted to quit your job in dramatic fashion? greg smith did it. he wrote a "new york times" op ed back in march that rocked the financial world. it was called "why i am leaving goldman sachs ." he described in gripping detail what he called the toxic environment at goldman , one that encouraged taking advantage of its clients. his book is now in stores. greg, good morning. thanks for coming on.
>> good morning. thanks for having me.
>> in the book, you frame the leadership of goldman sachs as having made a choice between profit and reputation. when did they make that swing?
>> as your viewers will know, earlier in the decade, there were a lot of things that were deregulated like complicated derivatives. it got to the point where banks saw they could make more money using their client information to bet for themselves as opposed to facilitating for a client business. ultimately by the time i left for firm, three quarters of the money was being made in the training business, as opposed to the original reason for wall street , which is helping companies raise money and merging. it's been a real revenue shift and also a behavior shift where taking advantage of clients has become the norm.
>> what you write about are ethics issues, not really legal issues, per se .
>> that's the great irony of the crisis. people question why has no one gone to jail for what happened in 2008 . the truth is it's actually legal, it's just highly unethical. the idea of ripping off a teacher's retirement fund or selling global charity, or betting against clients. while they're morally, highly dubious, they're actually legal. so what i'm advocating is we actually need to make these things illegal so people will go to jail for these things.
>> some of the things you write about are playing both sides of the fence. working a deal on both sides. again, not -- there's no crime here.
>> no. and there should be. when one bank is on all sides of a deal and using their client information to bet against them -- i use the example of a casino. if you're a casino and you can see everyone's cards in the casino, are you ever going to lose? probably not. there are some banks that go an entire 90 days in a row and make money every single day and it's purely for this reason, they can see everyone's cards.
>> did you want to hurt gold man sacks?
>> no, i'm of wall street . i've been on wall street my entire career. there's a group of people that wanted to be more sustainable. this idea of take the money and run is not a very good way for a company to last.
>> why write this unless you want to hurt them? and the next follow-up question is did you hurt them?
>> i wrote this book because after the op ed , i got thousands of messages from people, and there are two reasons i wrote it. goldman is a very mysterious place. i wrote this book for people who are not on wall street who want to understand what are the good parts and the bad parts. my idea with writing this op ed is to make goldman a better firm, a firm that does not have to settle half a billion lawsuit.
>> well, they claim they looked at a lot of your allegations and they released a statement, mr. smith's op-ed portrayed a firm that is unrecognizable to us and directly opposite to the culture we work hard to foster, but we took his claims seriously and conducted a thorough review of them. that review found no evidence to support his claims, but did find that mr. smith appeared to be frustrated about his career. so they say we looked at ourselves, we're clean.
>> i would say clients are being called muppets and goldman sachs said we look for the word muppet. calling someone a muppet is not bad in itself. the reason you're calling them a mup set the bad thing. when a police officer 's pungs fund is ripped off. i guarantee you, if your viewers read this book, they'll think this behavior is egregious. unfortunately, wall street has become so cynical that these practices are almost accepted. i would say i hope people read the book to get an understanding of what really goes on on wall street .
>> you've opened up quite a conversation. greg smith , thanks for being here. the book is called "why i left goldman