Am I a Goldman Sachs client or a muppet?

Scams and frauds have been bombarding news headlines. Now, a senior executive over at Goldman Sachs has just made a very public resignation with the company and through the New York Times, attacked the culture of the firm. He claims that Goldman calls their clients "muppets" and treat them in that very manner.

David Weidner
March 14, 2012, 11:05 a.m. EDT
Market Watch

NEW YORK (MarketWatch) — Greg Smith called the reason for his resignation an “integrity problem” at his former firm, but what about Smith himself?

Smith, who quit Wednesday as executive director and head of the U.S. equity derivatives business in Europe, Middle East and Africa for Goldman Sachs Group Inc. GS -3.35% , unloaded a broadside that — for all of its tangents — will sting the firm for years.

Goldman, which named a new communications chief this week, isn’t saying much, of course. “We disagree with the views expressed, which we don’t think reflect the way we run our business,” a Goldman spokeswoman said.

That doesn’t mean we can't guess what the firm would say on or off the record: Smith is disgruntled. Smith is wrong. Smith is overblowing the facts.

The problem for Goldman is that Smith’s main charge rings true. He alleges that the firm has subjugated clients in favor of profits. He relays that Goldman bankers call clients “muppets” and treat them as such. He lays the blame at the feet of Lloyd Blankfein, Goldman’s CEO, and Blankfein’s top deputy, Gary Cohn.

Smith’s grievances don’t come out of the blue. There is plenty of external evidence that Goldman has put its own interests before that of its customers: selling securities designed to fail, shorting the mortgage market and, most recently, another case in which Goldman had an obvious conflict of interest in advising both sides of Kinder Morgan’s agreement to buy El Paso Corp. EP -0.52% .

It’s not simply that the charges ring true; it’s that Goldman has always couched itself as a “client-first” firm, a claim that surprisingly endured even after its most serious breaches came to light.

Now, with an insider lifting the veil on a corporate culture that has abandoned its roots, Goldman runs the risk of losing those muppets. And, as Smith reminds the board of directors in the piece, “without clients you will not make money. In fact, you will not exist.”

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