On Greg Smith, Goldman Sachs, and a Perp Walk Down Memory Lane

Eddie Braverman's picture
Rank: The Pro | 21,129

I'm changing things up a bit today by posting a new piece written by Ledgerdemath author Omer Rosen. It's running concurrently on the Huffington Post, but Omer not only gave me permission to run it on WSO, he's also going to field any questions or comments you guys might have. Without further ado, I'll let Omer take it away:



A year ago I wrote about my shady derivatives dealings during my time at Citigroup--first in "Legerdemath," for the Boston Review, and then in "Legerdemath II: Anatomy of a Banking Trick," for Wall Street Oasis. The corporate-derivatives team I described working in dealt mostly with fixed-income derivatives. However, I also spent some time in a counterpart of sorts to the Goldman Sachs group Greg Smith recently resigned from, equity derivatives. His New York Times piece, reflecting on the deterioration of ethics he witnessed during his tenure in finance, prompted me to dust off some old memories...

Summer had just started, and my boss thought the slower season would be an ideal time for some "cross-group pollination" (or whatever industry jargon was used back then to indicate attempts to improve cooperation between two teams). My group, fixed-income derivatives, worked together with the equity-derivatives group sitting a floor below us on various client deals. It was hoped that if I spent a few months in equity-derivatives, I could bring back upstairs to my group a better understanding of what they did "down there," and, in so doing, perhaps also reduce tensions between certain personalities in the respective teams.

And so I moved from the trading floor on the fourth floor to its eerily similar twin a floor below, a quasi-doppelganger close enough in layout and environment to my old typing-grounds that my new life--amidst facsimiles of the bankers and traders, the white noise composed from hundreds of people talking and phones ringing, and the furnishings from my old life--was spattered by momentary flashes of spatial disorientation, instances of locational deja vu.

Now, when I reflect on the changes the transition brought, my mind first conjures up the routine: third-floor memories of a newspaper slowly making its way down the row as we get our day started juxtaposed against fourth-floor memories of snide glances at watches as I scurry to my desk, breakfast in hand.

Then I remember the workstyle changes: on my new floor, the work that needed to get done got done and new ventures were initiated--all without the extraneous projects and odd obsessions over obscure details in pitch books, driven seemingly by managerial ego alone, that wasted away so many of my days and nights on the fourth floor. My workday was suddenly just that, a day, no longer taffy to be stretched out endlessly, needlessly, superficially.

There were also more substantive and jarring changes, however. Here I was, in the equity-world parallel of my group, yet I was being treated humanely. "What to make of this?" I wondered. The clients were still the same. The ostensible mission still to manage risks for these clients. And yet, I was not being yelled at. And, even more shockingly, our clients were treated well. Their interests seemed to matter. There seemed to be understood and reasonable limits on the amount of money to be made on a given trade.

This difference in client treatment had not gone unnoticed by my new coworkers. One of them once told me, disdain unmasked, "I can't believe some of the stuff you guys do up there." I sheepishly mumbled some meek, murky defense about the need to make money on credit risk and this being a business and that clients try to squeeze us as well and never want to compensate us for our hard work...but ultimately fell silent, shame pitting corrosively at my stomach. I had been tried by a moral superior and been found wanting.

It was not that what I was saying was untrue, per se--clients (some of them, at least) did pose all the challenges I rambled about and more. It was that the appropriate response to our circumstances should not have been to lie to and rip off our clients. Especially since we used our circumstances as a sort of blanket, nebulous excuse to do whatever we wanted, even to clients that did not give us trouble or pose us much credit risk.

And so, when my rotation was over, at the risk of alienating the fixed-income derivatives group I was supposed to return to, I attempted to stay in equity derivatives. Alas, there was no room for me on a permanent basis.

However, the following year I was introduced to another equity derivatives team when a bank attempted to hire me away. Again I encountered what I can only refer to as ethical, nice bankers. Perhaps I could go so far as to refer to them as people. Yes, believe it or not, many bankers are human beings. But these human beings were from Chicago and, well, the position was in Chicago and, well, I did not want to move.

And that was that. I spent the rest of my time in finance working in fixed-income derivatives, sometimes helping clients and sometimes scheming away at their expense. At one point I attempted to beg off a project that made me uncomfortable by whispering to my boss, quite dramatically, "I feel like a criminal," only to ultimately be rebuffed with an accusation of laziness at a later date. It did not matter. I had already scampered off to work on other "ethically-challenged" projects, often without a second thought.

I have always looked back at equity derivatives as the positive counterpoint to my experience in fixed-income derivatives. I have enjoyed having it as a touchstone of sorts, something to swirl around scotch-like in my mind: Proof that one can care about client interests and still make money. That such an attitude might correlate with treating underlings as co-human beings. And that these two modes of human conduct might just be attractive to potential employees. They were to me.

For personal reasons, I am sorry to have that ludicrous vision dimmed by Greg Smith.

Comments (10)

Mar 23, 2012

Great post. I'd like to see more of these kind of posts in the future. Nice way to start the trading day.

    • 1
Mar 23, 2012

Omer, nice piece. Very well-written. You sound like one of the few (Very few) people who are in this industry because you generally care about doing a good job and serving your clients (while also making money of course). Such a quality is only admirable as it is rare.

The problem with our industry is that it offers (potentially) great wealth with comparatively little intellectual brilliance as a prerequisite. This has attracted all manner of filth who are only interested in lining their pockets regardless of the expense incurred by clients & fellow employees.

You are a dying breed Omer. Call me the cynic but I can't see this situation chaning. As bankers keep shooting themselves in the foot and drawing the wrath of the general public, it is only a matter of time before some populist Senator proposes nationalisation of the entire industry. Then the real arse-fucking begins.

Mar 23, 2012
SaucyBacon85:

Omer, nice piece. Very well-written. You sound like one of the few (Very few) people who are in this industry because you generally care about doing a good job and serving your clients (while also making money of course). Such a quality is only admirable as it is rare.

The problem with our industry is that it offers (potentially) great wealth with comparatively little intellectual brilliance as a prerequisite. This has attracted all manner of filth who are only interested in lining their pockets regardless of the expense incurred by clients & fellow employees.

You are a dying breed Omer. Call me the cynic but I can't see this situation chaning. As bankers keep shooting themselves in the foot and drawing the wrath of the general public, it is only a matter of time before some populist Senator proposes nationalisation of the entire industry. Then the real arse-fucking begins.

While I am no longer in finance, you give the younger version of me that was in finance (i.e. the one described in my piece) too much credit.

My ethics at the time were, for lack of a better word, inconsistent. Perhaps I had a greater awareness than some of my coworkers regarding said ethics, but I still went along with almost all of what we were doing. Often I was oblivious. Often I felt like it was somehow necessary. Often it was just part of the unthought-of routine.

Sure, sometimes I thought about it, even discussed it with colleagues. I was certainly aware of it. But mostly, if it did gnaw at me, I believe it did so at a more subconscious level. It is tough to look back and decide how often my internal thinking was ethical and how often it was something less than that. Sometimes I give myself more credit, and sometimes less. The past can be confusing. However, it is easy to remember how few times I actually objected to or tried to do anything about ethical questions I had. I saved most of my conscientious-type energies for complaints about the way my bosses treated me, not how we treated our clients.

Mar 23, 2012

Sometimes people gotta think about the big picture when they're doing God's work.

Competition is a sin.

-John D. Rockefeller

Mar 23, 2012

Riveting tale.

In the end it's about the Bottom Line.

This is the business of fleecing the client.

To think otherwise is just the epitome of naivety.

Mar 23, 2012

Great post Mr. Rosen.

However, what I'm more interested in, is why would these firms rip off their clients?

To me, these guys know that the financial sector is finished (going to shrink dramatically).

They're rational. If they had a rosy prospective on the future of the financial sector, no way they would jeoperdize all the future profits for a short term gain.

Mar 23, 2012
Abdel:

Great post Mr. Rosen.

However, what I'm more interested in, is why would these firms rip off their clients?

To me, these guys know that the financial sector is finished (going to shrink dramatically).

They're rational. If they had a rosy prospective on the future of the financial sector, no way they would jeoperdize all the future profits for a short term gain.

Well, if you do a good job of ripping someone off then they don't know they got ripped off. In fact, they think that they squeezed you and then they thank you for your hard work. Everyone walks away happy. And even if they do suspect something (I can only think of one case off the top of my head) you can talk your way out of it (as I did, and the client ended up very happy).

Besides, there is plenty of turnover in both bank and client employees and so there are opportunities to reestablish severed bank-client relationships if it ever comes to that. I'm not saying that there aren't a lot of angry clients in the world at large, just that my experience did not really include dealing with clients who felt like they got ripped off (at least not that I can think of right now).

Mar 23, 2012

Greg's wrote his Op-ed to appease the public.

Mar 23, 2012
go.with.the.flow:

Greg's wrote his Op-ed to appease the public.

this part of the public specifically: http://gregsmithandthebrokenenglish.com/ I'm guessing they received a nice boost in web traffic

Mar 24, 2012
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