In the wake of Greg Smith’s op-ed piece about why he is leaving Goldman Sachs, the press has been inundated with all sorts of opinions and comments both supportive and critical. Some question Smith’s motives; others question Goldman’s motives in attacking him. Few address Greg Smith’s central point ? that Goldman puts its own interests ahead of its clients.
New York Mayor Michael Bloomberg has reacted in a way that is supportive of Goldman and Wall Street, which is understandable, since New York is the financial capital of the world and many of his constituents ? those with the most money and influence ? work on Wall Street. But the articles about Greg Smith by Bloomberg writers were the most sarcastic and insulting of all those that were questioning or critical of him. Why is that?
Jon Friedman took notice and wrote a piece in MarketWatch about it. (“Goldman Sachs traitor enrages Bloomberg ? Commentary: Greg Smith’s op-ed clearly touched a nerve”). As a former Bloomberg employee, Friedman said he has some ideas about why Smith touched a nerve at Bloomberg.
First, Friedman acknowledged that reporters have a nose for insincerity and hypocrites and may well have been offended by Smith’s portrayal of himself as shocked by the culture at Goldman after being immersed in it for 12 years.
Second, Bloomberg reporters may have been upset over being scooped by the New York Times.
Or third ? and this seems to be what Friedman really thinks ? Bloomberg reporters may have been writing what they believe “Uncle Mike” wanted to hear. Here Friedman observes that Bloomberg is himself a distinguished veteran of Wall Street, and Bloomberg L.P., which makes a lot of money from Wall Street’s use of Bloomberg computer terminals, has a financial interest not to alienate the Goldman brass.
As for all of Bloomberg’s sarcastic zingers like: “It must have been a terrible shock when Smith concluded that Goldman actually was primarily about making money” ? they are really beside the point. It’s not that Goldman makes money for its shareholders but the way it makes money that is the issue. The fact is, Goldman Sachs and its registered representatives have fiduciary duties that are inconsistent with the way it has made billions of dollars ? not just according to Greg Smith, but according to a vast public record that is available for anyone to see.
Anyone who denies that Goldman Sachs has fiduciary obligations to its clients should read the June 22, 1940 edition of the N.A.S.D. News published by the National Association of Securities Dealers, Inc. (now FINRA), which plainly says that “a broker or agent is a fiduciary and he thus stands in a position of trust and confidence with respect to his customer or principal.” A securities broker’s duties are fiduciary in nature and have been since at least the 1940s.
Therefore, the opinions and comments we should be hearing are in response to this question (which is along the lines of one of the questions posed in Congressional hearings that went unanswered by all of the Wall Street CEOs who appeared to testify): “Does Goldman Sachs put its clients’ interests ahead of its own ? or not?”