If Greg Smith can be believed, Goldman Sachs has responded to the financial meltdown and election results of 2008 in the same dysfunctional manner as the Republican Party. Mr. Smith is resigning today from his position as “executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.” The reason? The culture of Goldman Sachs has deteriorated to the point that he can’t look recruits in the eye and say that it is a good place to work.

Even on a good day in a good year, Goldman Sachs has always been a mercenary place. If it is immeasurably worse today than it was four years ago, that’s really saying something.

I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

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…

…These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave.

He’s warning Goldman Sachs’ clients and potential clients that the firm can’t be trusted. And he explains how the culture was corrupted by poor incentives (and poor leadership):

Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence.

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Of course, I don’t think Goldman Sachs has been exercising good judgment for a long time. In the lead-up to the housing bust, Goldman was betting against financial products it was pushing on clients. So, I guess the warning here is that they’ve normalized that kind of behavior. It’s no longer the exception but the rule.

Add Goldman Sachs to a long list of institutions that learned the wrong lessons from the Bush years.

I hope some other firms can do the right thing by their clients and take some of Goldman Sachs’ business away.

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