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Thursday, March 15, 2012

JP Morgan Chase whistleblower follows Goldman Sachs exec who blasted bank as he quit

What’s going on in the banking industry? There has been a stampede of employees leaving banks in the last few weeks.

Goodbye to Goldman: Will Blankfein Be Next?

By Roben Farzad on March 14, 2012

Some day, when they write the definitive history of Goldman Sachs (GS), Wall Street’s 143-year-old warehouser of brass rings, the date March 14, 2012, will stand in infamy. If you haven’t already heard, that’s when Greg Smith, an executive with the bank in London, resigned with guns a-blazing, in a corporate revenge fantasy worthy of a sequel to Office Space. The 12-year veteran—he started as a summer intern during college—penned an op-ed in the New York Times that wasted zero time to cut to the damning chase:

Today is my last day at Goldman Sachs. … And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

Smith went on:

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as ‘muppets,’ sometimes over internal e-mail.

Exhale.

Think about this for a moment, because, well, it is utterly unthinkable in the annals of Goldmandom. Cosa Nostra be damned, an executive decides to go out as publicly and bitterly as possible, foregoing what was likely a substantial exit bonus that would have been predicated on his signing a nondisclosure agreement. To go up against perhaps the world’s most powerful and connected financial institution, whose PR apparatus is now helmed by the former right-hand to Treasury Secretary Timothy Geithner. A bank that is repped by more $1,000-an-hour attorneys than last spotted in the sprawling campus of lawyer hell. All while the Feds are still on Goldman’s case for the Sins of Subprime; the SEC is about to take action. You will almost certainly see Mr. Smith go to Washington.

In Wall Street terms, the Smith Manifesto (note to self: trademark last two sentences) will go down like the Emancipation Proclamation, Declaration of Independence, Articles of Confederation, and Magna Carta all rolled into one stinging little letter. Smith will no doubt recoup all/more of his lost hush bonus in a monster book deal. He’ll be on 60 Minutes and The Daily Show, extending the echo chamber of Goldman criticism that the firm surely thought had died down over the past year and change. A whistleblower whistling to his heart’s content—to the bilious heartburn of Chief Executive Lloyd Blankfein and Goldman’s board. Screenplay fodder, to boot.

Speaking of the board, Smith, for good measure, drove home the dagger:

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm—or the trust of its clients—for very much longer.

Translation: if the Goldman board takes Smith’s op-ed to heart, Mr. Blankfein’s days are numbered. Smith pretty much marked the embattled chief executive, as well as President Gary Cohn (both called out by name), for expunging. Their strategy of defending Goldman’s role in the Panic of 2008 as dispassionate and agnostic “market-making” on behalf of clients has officially been a failure.

Who will replace them—unsullied outsider? Ordained minister? That’s anyone’s guess, and it will provide fodder for weeks of speculation. Also in question is Goldman’s longevity as a preferred, even aspirational destination for billionaires and institutions seeking deal representation, elite money management, and the Street’s best advice. After all, you just had a highly placed insider dish on how the house sausage was mixed and extruded. Imagine how Morgan Stanley (MS) and Blackstone bankers will work their phones and expense accounts to cast aspersions on Goldman, with the Smith Manifesto in hand.

It’s a nightmare scenario for what was long Wall Street’s most storied and secretive partnership. Ultimately, the events of March 14 will be inextricably linked to another landmark day in Goldman Sachs history: May 4, 1999. That’s when Goldman went public, eschewing the need for partners to constantly risk their own capital and maintain superconservative risk controls on traders and department heads. True, Goldman would reap a windfall from shareholders, but at the great cultural cost of opening itself to the never-ending demands of transparency and quarterly earnings competition. Which then put the firm on a glide path to an m.o. of profit-at-any-cost, first with the tech bubble and Spitzer-era scandals and then through so much subprime counterparty alchemy, which so destabilized the whole system that it nearly went down—taking Goldman and its long-since-forgotten IPO riches with it.

Suddenly, Goldman became a household bête noire, courtesy of a damning Rolling Stone exposé. Goldman Sachs in Rolling Stone! That’s a vision that still has the firm’s dearly departed partners writhing in their afterlives. But remember to spare a tear or two for the Goldman living, who won’t stop hearing about that op-ed in the New York Times any moment soon.

(Disclosure: I worked for Goldman Sachs my first two years out of college.)


JP MORGAN CHASE WHISTLEBLOWER JOINS EX-GOLDMAN STAFFER IN OPENLY CRITICIZING THE PRACTICES OF HIS WALL STREET FIRM

Posted By: NaturalWisdom
Date: Thursday, 15-Mar-2012 12:14:12

From: Z A N
Organization(s: JPMorgan Chase
U.S. Commodities Futures Trading Commission
Comment No: 57019
Date: 3/14/2012

Dear CFTC Staff,

Hello, I am a current JPMorgan Chase employee. This is an open letter to all commissioners and regulators. I am emailing you today b/c I know of insider information that will be damning at best for JPMorgan Chase. I have decided to play the role of whistleblower b/c I no longer have faith and belief that what we are doing for society is bringing value to people. I am now under the opinion that we are actually putting hard working Americans unaware of what lays ahead at extreme market risk. This risk is unnecessary and will lead to wide-scale market collapse if not handled properly. With the release of Mr. Smith’s open letter to Goldman, I too would like to set the record straight for JPM as well...

Click here to read full report

2 comments:

  1. The "full report"is by now taken of the CFTC site.. !

    ReplyDelete
  2. Surprise, Surprise!! :)

    ReplyDelete