Why I am leaving Goldman Sachs

[August West]

Repeal of restrictive provisions of the the 1933 Glass–Steagall Act provided a real stimulus for investment bankers to expand their pre-existing drive to act on their own behalf at the expense of the client.

My first thought to the beltyism.

[Seacrest]

Grace62 wrote:
I'm curious as to what this guy plans to do for a living now that he torpedoed the Wall Street bridge. This has been his career since college.

What he does next will indicate to me whether this letter was sincere, or just a high profile rant.

There is definitely life after i-banking.
Meet Sal, former hedge-fund manager.

[GGD]

I wonder if the guy sold GS short before releasing the letter and covered today after they dropped.

[cbelt3]

Grace62 wrote:
I'm curious as to what this guy plans to do for a living now that he torpedoed the Wall Street bridge. This has been his career since college.

What he does next will indicate to me whether this letter was sincere, or just a high profile rant.

He's probably retiring. Net worth most certainly in the 10-50+ $M range. I don't know if this was a "Jerry Maguire" moment, or a parting shot. I'm sure he'll be on the n00z explaining his story, or writing a book. We will learn more.

[Grace62]

cbelt3 wrote:
[quote=Grace62]
I'm curious as to what this guy plans to do for a living now that he torpedoed the Wall Street bridge. This has been his career since college.

What he does next will indicate to me whether this letter was sincere, or just a high profile rant.

He's probably retiring. Net worth most certainly in the 10-50+ $M range. I don't know if this was a "Jerry Maguire" moment, or a parting shot. I'm sure he'll be on the n00z explaining his story, or writing a book. We will learn more.
NY Times reports his total income last year as $500K, and that's likely his highest pay because he just got his promotion to London a year ago.
If he does want to stay in the investment banking business he's going to have a tough time, because rule #1 is don't badmouth your old boss. I see that his parents are in "helping" careers, so he likely was not raised with a profit-above-all mentality, hopefully he can put his considerable talents to work in benefit of others.
People stay with Goldman not because they are nice people but because they make rich people richer. As long as they keep doing that the clients are going to stick around.

[rankandfile]

$tevie wrote:
If you READ the column, the person who worked there for almost 12 years says it was not always like that at Goldman Sachs.

$tevie, it was. He was probably just was too young, new, and unaware at the time to know.

Many good points have already been made in the thread.

The fundamental correlation between banking profits and real productivity in the economy (everybody else) has been broken. Large financial firms make the vast majority of their money from artificial instruments, i.e., some version of derivative investment. They jacked up their returns with bundled mortgages built to fail and then bet against them. Credit default swaps, properly regulated, serve a worthwhile function. They, too, were perverted by further derivation, i.e., CDO's which were bets on CDO's which in turn had CDO's..., etc. These are just a couple of examples among many.

The system has privatized gains (the 1%) and socialized the losses (everybody else).

When the house of cards collapsed, the money sucked out of the system came from the 99% for the most part. The money that was created to fill the black holes on the firms' balance sheets came from the 99%, as well. I am still amazed at how little attention has been paid to where the money went. Some was due to paper loss; a great deal was not. It was made on the other side of the transactions. These trails have not been adequately tracked down. We can all speculate why.

Two changes stand out in my mind that contributed greatly to the breakdown of the financial system:

1) Brokerage firms going public. Before selling shares to the public, investment firms were partnerships that risked partners' capital. Investments had to have real profitability. Losses came out of partners' pockets 100%. After going public, partners retained large ownership positions that were artificially valued, and they were free to invest with other people's money. There were still incentives to be prudent, but much less so. Regulations were systematically weakened or ignored. Incestuous relationships between firms and regulatory agencies became much more widespread.

2) Repeal of Glass-Steagall. For all the good Bill Clinton did, IMHO, the worst thing he ever did was agree to repeal Glass-Steagall. We need to reinstate similar rules and boundaries once again. The "financial reform" that was recently enacted stinks. It was watered down, and even now is being stymied from implementation. For example, Bank of America has been allowed to move $55,000,000,000,000 (That's Trillion, boys and girls) onto the FDIC side of the their balance sheet. That staggers the mind. The potential risk is unquantifiable.

I strongly believe in the basic value of the capitalistic system; however, unfettered capitalism has never worked for the benefit of society as a whole. It always results in an unstable, top-heavy system; an upside down pyramid, if you will. Such a system by its very nature is doomed just as any ecosystem fails when it is overrun by one component. Paraphrasing Socrates: "The weakness of any system is an excess of its basic principle."

Financial barbarism has a viciousness all its own. We have rules in all parts of civilized society. Our financial system should be no different.

[rankandfile]

To be clearer:

In my above post, the $55 Trillion is derivatives that were on the Merrill Lynch balance sheet. BankofAmerica asked to move them in order to transfer the potential loss to the FDIC.