As GS soap opera plays out, here is what I think.
Greg Smith's "Why I Am Leaving Goldman Sachs" parallels Mark Zuckerberg's blog post after Jessica Alona broke up with him. Mark called her "bitch" in his blog. Glaring lack of Grace.
The guy worked at GS for almost 12 years and took full monetary advantage of GS's culture. Since he doesn't return his bonuses, he is as obnoxious as the rest of GS managers he describes.
Now, what about Wall street at large?
Part of the financial crisis of 2007-2008 was due to the rating agencies rating risky bonds as AAA bonds pursuing profits and competing with each other for the clients-bond issuers. They, in effect, were taking advantage of the pension funds buying these bonds based on the AAA rating. I asked the head of the research of one of the rating agency about that. He answered that those who buy the bonds have to do their own research. Sounds similar to the Blankfein's response to why GS was selling to its clients the tools which were not appropriate for them. Blankfein said that the clients buy
instruments with the predefined risk profile to play certain role in their portfolio and that's, in the end, client's decision which instruments to buy.
The broader part of the financial landscape is institutional wealth management based on the model portfolios. The clients are duped to believe that there is scientific prove behind the models. They are not told that the investment theory cannot be proven experimentally, and, therefore, it's not a scientific theory. The wealth management is a huge industry swallowing one third of the client's money over the thirty-forty years of the client's portfolio management.
How exactly is GS different? The level of cynicism?