By Pam Martens: March 19, 2012
The muppets are in revolt against their masters. No, I don’t mean customers of Wall Street’s big firms. I’m speaking of corporate media muppets. Greg Smith lit a match and now there are smoldering embers dangerously burning at Bloomberg Views and Forbes.
Smith is the 33-year old derivatives executive at Goldman, Sachs & Co. who published his blistering resignation letter on the OpEd page of the New York Times. According to Smith, managing directors at Goldman call their clients muppets and openly speak about “ripping their clients off.” Smith said the environment at the firm is “as toxic and destructive as I have ever seen it.”
The OpEd was published on Wednesday, March 14, and went viral on the internet. Next came a mesmerizing look at the underbelly of crony capitalism. The Mayor of the city that sent its police in the dead of night to rough up journalists and censor press coverage of their raid and destruction of the Occupy Wall Street encampment at Zuccotti Park in lower Manhattan, is condoning Wall Street employees manning a spy center alongside NYPD cops to keep tabs on protestors, and rents out uniformed, armed cops to Wall Street firms, went into damage control mode for his pals at Goldman over Smith’s letter.
According to the New York Times, by Thursday Mayor Michael Bloomberg, a former trader for the investment bank, Salomon Brothers, was shaking hands on the trading floor at Goldman and having a burger with CEO Lloyd Blankfein. According to the 2012 Forbes list of billionaires, Bloomberg ranks number 20 with $22 billion stashed away. As we previously reported, the Mayor’s business empire which bears his name, includes the expensive Bloomberg terminal, a computer that houses enormous pricing data for stocks, bonds, research, news, charting functions and much more. There are currently an estimated 290,000 of these terminals on Wall Street trading floors around the globe, generating approximately $1500 in rental fees per terminal per month. That’s a cool $435 million a month or $5.2 billion a year, the cash cow of the Bloomberg businesses. In other words, when the Mayor paid a visit to Goldman on Thursday, he wasn’t just visiting an important employer in New York City, he was visiting one of his biggest clients, while on the taxpayer’s payroll.
At 6:41 p.m. on the same day that Smith’s OpEd ran, Bloomberg View, the opinion pages of the Mayor’s publishing empire, launched an unsigned, snarky and decidedly lop-sided attack on Greg Smith. The anonymous editorial page authors sounded more like dodgy pr flaks:
“We have some advice for Smith, as well as the thousands of college students who apply to work at Goldman Sachs each year: If you want to dedicate your life to serving humanity, do not go to work for Goldman Sachs. That’s not its function, and it never will be. Go to work for Goldman Sachs if you wish to work hard and get paid more than you deserve even so. (Or if you want to make your living selling derivatives but don’t know what a derivative is, as Smith concedes in passing that he didn’t at first.)
“Goldman and other investment banks do perform an important role in our economy, and Goldman bankers — most of them, at least — can hold their heads up high. But it is not charity work. Goldman’s clients are mostly very well-off. Smith’s lament that the bank no longer serves their needs above and beyond its own does not tug at our heartstrings.”
Just how do these anonymous authors know that most Goldman bankers “can hold their heads up high.” How could anyone know that? The SEC sure doesn’t know it, having charged Goldman with defrauding investors on April 16, 2010. At the time, Robert Khuzami, Director of the SEC’s Division of Enforcement, said: “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.” Goldman settled that complaint for $550 million and promised to reform its business practices. Other examples of Goldman’s jaded ways with its customers abound, dating all the way back to 1928.
In the asset bubble of 1928, Goldman ran the Goldman Sachs Trading Company, a closed end fund (called a trust in those days) that Goldman Sachs created and offered to the public at $104 a share. The trust was stuffed with conflicted investments while paying Goldman a hefty management fee, only to end up a few years after the 1929 crash trading at a buck and change. On May 20, 1932, Walter Sachs, President of the Goldman Sachs Trading Company, was grilled by the Senate Committee on Banking and Currency. The implication was the same as the 2010 Senate hearings: Goldman royally fleeced its customers to line its own pockets.
As of this morning, 658 reader comments have been posted to Bloomberg Views’ anonymous editorial. Here’s a representative sampling:
Zachariahwheeler writes: “…the manner in which you respond to Mr. Smith smacks of desperation and makes you sound dunce-like indeed…”
FoolCount writes: “What kind of crap ‘editorial’ is that? Does the author really not see a difference between honest money-making and shamelessly screwing one’s own clients?”
MarcusLim writes: “This editorial is, in one word: Disgusting. Making money, but not at the expense of your clients, and not to your clients disadvantage. If the Bloomberg editorial board cannot understand this simple concept, then they are not in a position to understand or conduct business of any sort.”
And on and on it went. The muppets were on a rampage.
The same type of fallout occurred at Forbes when it ran a snarky opinion piece, although reader comments were much fewer. A Forbes staffer, John Tamny, who says he interned at Goldman and then worked there from 1997 to 2001, titled his opinion piece “Greg Smith’s Gratuitously Opportunistic Departure from Goldman Sachs,” chiding Smith as follows:
“My own perspective is that Smith is an opportunist of the first order, and worse for those taken in by his ‘insider’s account’ of what actually goes on within the walls of the world’s foremost investment bank, what he wrote was utterly nonsensical. This quickly will become apparent once his scribblings are analyzed against greater investment banking realities.”
One Forbes’ reader, Mike Godsey, said: “…watching how Forbes has dealt with this entire issue I realize that the magazine has an agenda that does not include objectivity. Even in today’s toxic political climate I expect at least the pretense of presenting both sides of an issue. Sad to delete my Forbes bookmarks…”
Godsey is not the first person to charge Forbes with having an agenda. In 1996, Fortune magazine reporter, Jeanie Russell Kasindorf, with associates Anne Faircloth, Tim Carvell, and Rajiv M. Rao, took an in-depth look at the Forbes publishing empire that Steve Forbes inherited from his famous father, Malcolm Forbes. The article charged that during Steve Forbes’ stewardship, staffers “have seen stories changed if the writer has turned in a negative assessment of an advertiser. In other words, the magazine’s editors are turning downbeat stories into upbeat stories in order to keep advertisers happy–even at the risk of misleading their own readers.”
The article goes on to cite multiple examples of how negative stories were edited to be more favorable, or killed outright, if the company advertised in the pages of Forbes.
Greg Smith wrote an OpEd that caused a stir. But the real scandal is how some corporate media outlets responded.
