Goldman Exec Says Goodbye to the ‘Destructive’ Firm

In an open letter to the New York Times, Greg Smith explains how drastic changes in company culture led to his resignation today as one of Goldman Sachs’ executive directors.

When Smith began work at Goldman as an intern, he asserts the company’s success “revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients.” Smith says that mindset was the company’s “secret sauce” that helped them build trust with clients for over 140 years.

However, Smith now asserts that Goldman is “as toxic and destructive” as he has even seen it. Smith asserts the company has placed profits over the interests of their clients, and as long as employees can make money without becoming “an ax murderer” they can be promoted within Goldman. Smith believes he had no choice but to resign given that he “can no longer in good conscience identify with what [Goldman] stands for.”

Smith’s letter sent shockwaves around Wall Street and certainly within Goldman Sachs. Lloyd Blankfein, Goldman’s CEO, released an internal memo saying that Smith’s assertions “do not reflect our values, our culture, and how the vast majority of people at Goldman…think about the firm…”

Blankfein also asserts that Smith’s comments “should not represent our firm of more than 30,000 people,” and that he expects employees to find Smith’s claims as “foreign from [their] own day-to-day experiences.” Despite Blankfein’s rebuttal, it is hard to discredit Smith’s assertions given his former position in the company.

Smith served as head of Goldman’s United States equity derivatives business in Europe, the Middle East and Africa. In addition, Smith once managed the New York sales and trading summer intern program. Of the 30,000+ employees at Goldman, Smith was selected “as one of ten people to appear in [their] recruiting video, which is played on every college campus [Goldman] visits around the world.”

This suggests that Goldman Sachs, as well as other firms on Wall Street, may still need to reconsider some of their key business practices. Smith asserts firms like Goldman are “too integral to global finance to continue to act this way.” In his final sentence, Smith says, “People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer.” 

It is likely those people will not sustain this nation’s economic well-being either.


- Jarrett W. Smith

Unemployment Holds Tight

The US Department of Labor Statics released their employment numbers for February on March 9^th.  The report showed about 227,000 jobs were created during the month, while the unemployment rate remained unchanged from the January number, 8.3%.  The number of jobs created in February is slightly down from the 284,000 jobs created in January.  Retail jobs declined in February, while the percentage of unemployed men and unemployed women both remained equal at 7.7%.   

  Unemployment data is a key indicator of the strength of the economy and is always closely scrutinized by Wall Street.  Many experts on Wall Street see this report as solid, even though the unemployment rate remains high.  However, critics believe the economy needs more growth and the number of jobs created each month must continue to increase in order to lower the unemployment rate.

  Discouraged workers reentering the job market are one of the key factors in keeping the unemployment rate constant from January to February.  Discouraged workers are not taken into account in the unemployment figures because they are not actively seeking employment.  However, in February economic confidence was high coming off the surprising January unemployment rate, so analyst believe many reentered the market and offset any drop in the rate.     

  I believe in the next couple of months, the unemployment rate will continue to hover around 8.3% as citizens continue to gain confidence in the economy and reenter the workforce. 

  I would not be surprised if the unemployment rate happened to increase.  The more important factor to me is the number of jobs created each month, and, as long as jobs continues to be created the economy will turn itself around.  In addition, with the upcoming presidential election looming, if unemployment drops below 8%, President Obama will have a great speaking point and strong figures to lean on for reelection.  

-Morgan-Reese Hale

Just Go with the Flow: The Journalist's Need to Adapt Quickly to Technological Changes

I went to a lecture given by Ken Auletta this afternoon about how news and media are being changed by technological advances.

One of the most interesting points I thought he made was about why technology keeps developing so rapidly. Auletta said Google engineers he spoke with explained to him their mindset while they worked: Why not? In other words, what is stopping them from coming up with a new idea, such as selling individual songs for 99 cents, and implementing it?

It appears to me that technology engineers are able to decide on a goal, and then do whatever they possibly can to reach it. So why can’t journalists do the same thing? When a new technology is developed that affects journalism, journalists should be able to think like the engineers and find a way to overcome the new obstacle.

If journalists can discover better adaptation mechanisms, I think that they would be less likely to face hardship in the first years of new technology’s popularity. Auletta also said that journalists fear the future because of technology changes. I think that instead of being afraid of what technological advances have in store for media, journalists should ask themselves one simple question: Why not?

- Olivia Davis

A Warm Winter: A Blessing or a Curse?

This past week Lexington, Va. experienced its first real snowfall of the winter season, which got me to wondering what effect has this unseasonably warm winter has had on the economy. 

For many private businesses, particularly in the North and ski country out West, the effect has been detrimental.  According to an article in Time, skier visits at six mountain resort properties have dipped more than 15% year-on year.  The ski industry relies on the cold weather and snow to attract tourists and turn profits.  With a largely seasonal income these resorts have had to suffer through small crowds and continue to hope for a late snow surge to recover some profits.

Other industries have also felt the pain of a warm winter.  Cold-weather clothing sales are down, as are sales for shovels, snow blowers and salt.  In the North these account for a significant part of the winter seasonal income for retail and hardware stores.

One of the most interesting industries to look at in terms of the warm winter is the plowing industry.  There is a large contingent of people in the North that earn a living in the winter plowing driveways and commercial parking lots.  Without snow, they have been put out of work.  Landscapers, who use plowing in the winter to supplement their summer businesses, are now abandoning hope for their winter income and hope an early spring will lead to an increase in their warm weather profits in 2012. 

But for some, including most cities across the North, the warm winter has been a blessing.  According to an article in The Guardian, Buffalo, NY has saved more than $300,000 on salt and public works overtime is down by 25%.  In North Dakota snow removal costs have fallen by nearly half.  For many cities strapped for cash in this poor economy, the warm winter has been welcomed with open arms as the money can now be spent elsewhere.  

So as the seasons begin to change and spring rolls in, this winter has left many businesses disappointed with profits and city governments ecstatic with budget surpluses.  But if I know anything about Mother Nature, it's only a matter of time until she evens the score. 

-Tyler J. Tokarczyk

Fannie and Freddie: Mind the Debt

U.S. taxpayers were reminded on Tuesday that our long national Fannie Mae and Freddie Mac nightmare is far from over.

During the 2008 financial crisis, President Bush and the Democratic congress approved the formation of the FHFA or Federal Housing Finance Agency.  The organization would manage the GSE’s Fannie and Freddie.

The head of the organization Edward Demarco issued Congress a note Tuesday on how to fix their ailing investment.  The plan calls for building a secondary mortgage marketplace infrastructure with the goal of getting more private involvement in the industry, to slowly contract the GSE presence in the market and help prevent foreclosures and maintain credit availability for new mortgages.   

The total Treasury bailout of Fannie Mae stands now at $180 billion, with only $14.7 billion being returned in the form of dividends. This is more than twice as much as the bailout for the automakers (which totaled some $60 billion) and is by far the largest outstanding bailout debt still owed to taxpayers. Together, the two mortgage giants owe more to taxpayers from their bailout than all other industries combined, and the bill is still growing.

This is a problem that can’t be ignored.  Fannie and Freddie continue to dominate household mortgage holdings in the U.S., with over 90 percent of all U.S. mortgages owned or guaranteed by them. Together they control nearly 31 millions home loans with a total value in excess of $5 trillion. 

-Bryan Kloster

Margin Call and the Lack of Informed decisions

When I watched the movie, Margin Call, I was pretty disturbed by the lack of informed decisions made by the bankers. One of the bankers stated that in banking there is "never a choice". This idea that things are decided automatically, without any discussion or thought was very scary to me and  made the whole banking process seem unnecessarily risky. Similarly, going  off of this idea that the banking process is just an automatic response, one banker said, "we just react and there's always a winner and a loser." This makes it seem like the bankers aren't in control of the situation and were never in control. It's a scary thought that at any moment the economy will either make us "winners" or "losers". It's even scarier when the bankers who are suppose to be monitoring everything are simply just reactors to the situation and not actively in control. And then this isn't even the worst part. The movie went on to suggest that some of the bankers don't even care about the assets that they monitor. As one banker says, "it's just money; it's made up". This type of ignorant attitude is the last quality I would want my banker to possess. It goes along with the theme that the bankers aren't really involved or in control of the situation, they are just by-standers who react automatically and without thought.
-Laura Simmons

Margin Call and Digging Ditches

In Margin Call, writer/director J.C. Chandor often compares the jobs that exist on Wall Street to other professions that produce more tangible results, such as construction or engineering. Peter Sullivan, the young but exceedingly bright analyst that discovers the crisis that the bank he works for is in, often questions the worth and morality of his job. Admittedly, he himself was drawn to Wall Street for the attractive pay and the fact that the job only requires that he "move numbers around." However, as he learns what his bosses are getting paid, Sullivan is shocked. He knows the little knowledge that those above him have, and does not believe anyone in any profession deserves that much money.

Sullivan is not the only one who perceives his job to be of little value though. In one scene, Sullivan is trying to explain to board members the crisis their bank is facing. The members, who would rather ignore bad news than address it and fix it, immediately begin to question Sullivan's background. As they find out that Sullivan is essentially a rocket scientist, with degrees from UPenn and MIT, they all retreat from their interrogation, fully aware that although he is simply an analyst, he is clearly the smartest person in the room.

Near the conclusion of the film, Sam Rodgers, a senior executive at the firm, also questions the worth and morality of his job. As his boss tells him, "come on, you could be digging ditches right now," Rodgers points out that at least if he was digging ditches, there would be evidence of his work in the soil of the earth.

Through these muses on worth and morality, Candor emphasizes the little value that Wall Street adds to society. I personally cannot comment on that, because I still don't really understand how Wall Street works. When I talk to my friends, all of whom are pursuing careers in finance and investment banking, I always find myself completely lost, and usually tell them, "you guys are just making terms, numbers, and money up." It was refreshing to me when watching Margin Call that someone else agrees with me.

- Bryan Stuke