Greg Smith wrote the essay that echoed across Wall Street like a thunderclap.
Smith, 33, was a vice president at Goldman Sachs until March. He announced his departure from the investment bank with a blistering opinion piece in the New York Times, accusing Goldman of routinely deceiving clients and relentlessly pursuing profit at the expense of morality.
Goldman Sachs denies Smith's allegations about deceiving clients. The bank says it took his concerns seriously, thoroughly investigated them, and found no evidence to support them.
Smith's book, Why I Left Goldman Sachs, was released Monday. What Smith hopes to do, he says, is educate people about how Wall Street works, and fuel a public conversation about what went wrong ethically, and how to fix it. The practices that caused the financial crisis, he says, were never really resolved; they're just lying dormant. Smith recently spoke with the Associated Press. Here are edited excerpts:
The bank denies everything you've charged about their ripping off clients.
The thing that disappoints me most is that management is denying there's a problem. Why not try to repair the trust instead? Clients are telling you they don't trust you. There has been an SEC fraud suit that was settled for half a billion dollars.
I'm not some lone voice who thought there was a problem, a change from a client fiduciary model (doing what's best for the client) to use-the-client-to-extract-wealth model. It's a problem that many, many of my colleagues felt and that the public feels as well.
You were at Goldman for almost 12 years, if you start with your summer internship in 2000. Weren't there times when you should have stood up, should have said something about what you thought was morally wrong?
I actually made a conscious decision not to sell toxic deals to clients. I didn't think it was the right thing to do, but I also saw the idea that if clients' trust is being burned and they're getting blown up, you're not going to have a career for very long.
Now that does not mean I was not part of a system that was doing things that were unethical. In the book, I try to show some of the conflicts I noticed that gave me pause. For many years, I gave the firm the benefit of the doubt.
What do you hope to accomplish with your book?
People know there's this huge conflict, and that things are being done that are unethical, but are not necessarily illegal. But nobody can put their finger on exactly what the problem is. My goal with the book was to write it to a general reader who knows nothing about finance. By the time someone reaches the end of the book, they can say, "I can now speak more intelligently about where the conflicts of interest are, and I can lobby my congressman or I can speak about it more."
The banks are going to say any bad practices were caused by just a few bad actors, and that those guys are gone.
This is not some conspiracy of five people sitting in a room plotting to destroy the world. This is far more boring. This is where people have created a perverse incentive system.
If someone can overcharge a client by a million dollars, their leaders are going to say, "Great job, we just made an extra million dollars off this pension fund."
Why should we care about what happens on Wall Street?
You see a lot of commentary that Wall Street is just rich people gambling with other rich people's money. I want people to know that it ultimately affects everyone. In 2008, banks had to be bailed out and that hits taxpayers. If you're a teacher or a fireman or a charity, and you have an investment fund that is trading with Wall Street, and Wall Street is not being held accountable and behaving ethically, then that directly impacts everyone.