Goldman Sachs

[Grenville]

Hey guys,

 

I wanted to get people's thoughts on the huge compensation numbers set aside for employees of Goldman Sachs.

 

In the recent quarter compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as payroll taxes, severance costs and benefits) were 6.65 billion. In Q1 this number was 4.71 billion. The total for 2009 so far is 11.36 billion with two quarters left in the year!

 

I understand Goldman's franchise has gotten much stronger with the weakening of many competitors but in light of the substantial amount of government support both indirect and direct, the compensation numbers don't sit well with my gut.

 

This all is more of a concern for me through my ownership of Goldman through Berkshire. I know high compensation numbers mean good results at Goldman that benefit Berkshire's investment. Although, in my limited understanding it seems like Goldman was on the brink of failure much the same way other firms were and they were saved by the AIG bailout and all the government support. Given the substantial risks the employees put Goldman Sachs franchise in, the compensation numbers seem like the wrong incentive.

 

Any thoughts would be appreciated!

 

 

[JAllen]

How was Goldman on the brink of failure? 

 

Were they one of the ones that requested the TARP funds or were they forced to? 

 

 

[ExpectedValue]

they drastically benefited from the takeover of AIG and the TARP. Without it, they'd have to raise capital at a very bad time.

[Guest Broxburnboy]

Goldman Sachs is (are?) scum:

 

 

[Grenville]

Knowing what you know, are you guys comfortable with the large compensation packages and the inherent incentives they reinforce in the employees going forward?

[benhacker]

Knowing what you know, are you guys comfortable with the large compensation packages and the inherent incentives they reinforce in the employees going forward?

 

I'm comfortable enough to risk 2% of my portfolio in the preferred/debt.  I'm a bit disappointed as a citizen, but I do believe that Goldman is a special breed.

 

I think the whole non-transparency of some of the dealer markets they profit from (OTC bonds, derivatives, etc) are destined to be broken soon because their moat their is not needed by society and they have no 'right' to it... but it's there now so they can cash checks until the rules are changed.

 

Personally, I find their business perfect IF lobbying and political donations / kickbacks could be controlled.  I agree that incentives are hard to manage, but I don't find their large payouts to be nearly as crazy as some arrangement at other less prominent companies.

 

That's my take at least.  Others may feel differently... not my favorite holding, but I'll hold my nose and cash some checks.

 

Ben

[link01]

I understand Goldman's franchise has gotten much stronger with the weakening of many competitors but in light of the substantial amount of government support both indirect and direct, the compensation numbers don't sit well with my gut.

 

i'd be more worried about the upswelling of political risk & public backlash more than anything. its hugely unquantifiable, imo.

 

http://online.barrons.com/article/SB124786956635760403.html

 

http://www.nytimes.com/2009/07/17/opinion/17krugman.html?_r=2

 

http://trueslant.com/matttaibbi/2009/07/16/on-goldmans-giganto-profits/

 

http://borowitzreport.com/article.aspx?ID=7047

 

http://thereformedbroker.com/2009/07/17/lucas-van-praags-to-do-list/

 

http://www.epi.org/analysis_and_opinion/entry/behind_goldman_sachs_second_quarter_profit/#When:00:27:45Z

 

http://zerohedge.blogspot.com/2009/07/why-does-goldman-need-fed-exemption-for.html

 

http://www.ritholtz.com/blog/2009/07/max-keiser-takes-offense-to-goldman-sachs-story/

 

and that's just a small sampling!

 

the only 2 i feel comfortable with are jeffries (jef) & international assets holdings (iaac). the latter is one i've been buying again after owning it for a couple of years in 2006. but if gs & the other big boys come under increasing political & public attack, the babies will be thrown out with the bath water.

[Cardboard]

Look guys. Goldman Sachs was the only one among the top 5 independent U.S. investment banks that did anticipate the burst of the housing bubble AND who protected itself against it. Yes, just like Prem, they avoided CDO's and bought credit default swaps. It posted a quarterly loss only in the 4th quarter of 2008. It has always been profitable otherwise. Pretty hard to find such performance and it seems to me that they had good risk controls and avoided being greedy like their peers and most of the banks.

 

We can argue that bailing out AIG was a huge help to them, but I would say that it was also a big benefit for me as for probably any of us since it would have likely lead to a financial disaster for many large financial institutions. At some point they had to stop the daisy chain. Maybe you preferred to see the end of the financial system and going back to fishing, hunting and gardening for a living?

 

Regarding Goldman's financing, they paid quite a hefty price for this crisis which was not of their own doing, issuing $10 billion in stock at $123 and $5 billion to Berkshire paying 10% accompanied by $5 billion in warrants exercisable at $115. The TARP was not free either. They paid $426 million to the government in dividends on the $10 billion which has now been repaid and gave them warrants for 12.2 million shares exercisable at $122.90. Goldman did not steal anything from the American tax payer. JPM either. They will make money with them. It is the Citigroup, AIG, Fannie Mae, Freddie Mac and GM of this world that are not repaying their debt.

 

So if you can get passed the conspiracy theory stuff and the high compensation, this company is so well positioned, cheap, with an ultra sound balance sheet that you should take a serious look. 09 EPS will be in the $20 range, 10 EPS will approach if not meet $30. The analysts are way... way behind with their estimates, but they are moving them up. I cannot find any large cap ($10 billion or more) trading so cheaply with such a clear earnings picture. If you like big companies with a moat at an attractive valuation this is it. 

 

Finally, we may see some government restrictions on risk taking, but I think that they are prepared with a Tier 1 ratio of 13.8% and much less competition in their industry. They won't have to do crazy things to make money. They are already #1 worldwide in M&A. I also think that this attitude to "punish" Goldman will disappear once financial markets gain some ground.

 

Cardboard

[Guest Broxburnboy]

Over the years since Republicans in the US abandoned their traditional policies of sound money and balanced budgets in favour of supply side stimulus and tax cuts (introduced in the Reagan era), free enterprise capitalism has been replaced (at the top of the economic pyramid) by monopoly capitalism and cartels. Free enterprise is a stage in the cycle of capitalism that requires a level playing field (access to capital, access to markets, freedom from unfair competition) to be sustainable. If regulation enforcement is missing, successful enterprises use their market power to stifle competition and create a monopoly with an eye to fixing prices higher.. and become too big to fail.

This is the inherent contradiction of free enterprise, first noted by Adam Smith.. it contains the seeds of its own destruction. Marx and the communists also noted this and saw that the last capitalist would sell to the revolutionaries the rope with which to hang himself.

We are currently in a stage of the capitalist cycle which screams for the enforcement of existing anti trust legislation, to weed out the inefficient, counter productive, too large to fail monopolies/cartels. However, the regulators (Congress) have been co-opted by the same monopolistic interests. Wall street and the military/industrial complex (against whom Eisenhower warned us) provide the funds to elected officials to win elections. It is virtually impossible to gain office without their sponsorship. The elected officials then proceed to govern in the corporate interest, often in opposition to the clear public interest.

We have recently seen in the US, a change in government that was expected to reform policy, but in fact, in matters of substance such as the economy or wars, policies have not changed and neither have the prime actors. Wall Street as represented by the Goldman Sachs ulumni, are in full control of economic and monetary policy. There currently is before Congress an attempt to audit the Fed, and reclaim some of Congress' constitutional powers that have been ceded to the private sector... it will be interesting to see if it can pass, somehow I doubt it.

[Cardboard]

I think that you are right Broxburnboy and that we should greatly worry about that. I don't think that I have ever seen "free entreprises" growing so rapidly from nothing in the States including Google, but anyway...

 

These damn republicans and conservatives... By the way, Goldman Sachs is a huge democratic supporter. If it is any consolation, I will send you a t-shirt once GS share price does what I think it will do with the following written on it: "I love Goldman Sachs".  ;)

 

Cardboard

[Guest Broxburnboy]

I did not intend to blame the Republicans, in fact I have pointed out that there is no substantial difference between the two parties, they are in effect the same. Both have abandoned traditional policies of sound money and have embraced endless deficit spending, although the democrats used to believe in having tax revenues balance government spending. Now cutting taxes AND expanding government spending is held to be a solution by all.

If markets were allowed to function through regulatory enforcement and free trade, Goldman Sachs, Citibank, GM and the rest would never have gotten too big to fail, but their capture of government now shelters them from discipline of the markets to the detriment of the economy as a whole. We are witnessing the further consolidation of wealth and power by the corporate elite.

[yudeng2004]

The problem with Goldman Sachs is not that they are using taxpayer money and not paying back (they did pay back) nor is it with their ability to allocate capital.  The problem with Goldman Sachs is what it represents - that financing and speculation are better rewarded in society than building and innovating.

 

It speaks to what we currently reward the most - that trading things around should be more beneficial than creating and providing high quality products and services.

 

If you are just out of college, and you work as a banker - what exactly do you do? You are an "excel monkey" - you do data entry and you make sure the pitchbook is formatted correctly. For this you are paid well into the 6-digits.

 

80% of that work can be done by a smart computer algorithm nowadays, and unless you are higher rank than a VP, you don't get to interact with the customer that much anyways.

 

Why is the computer algorithm not there to do the data entry and the formatting? Because unlike the internet, the banking industry is not "open".  It is governed by habits, and old tradition.  So banking, especially investment banking, is a very "labor intensive" industry. 

 

Did you know a lot of banks actually have people changing the stock price in their Pitchbooks MANUALLY every day as the stock price changes?? Did you know you can generate 80% of the content of a pitchbook by writing a smart google spreadsheet in less than 1 hour?

 

And did you know you can earn 200-400k/year writing these pitchbooks using the dumbest methods known to man ? Nobody doing this kind of work should be paid that much considering the much cheaper alternative is there.  The banks don't adopt it because the higher-ups don't know much about tech and they can still earn healthy margins without it.

 

I can care less about the TARP money, I get more angry when i see people doing things that can be done at 1 dollar and charging 100 dollars for it. 

 

What Goldman Sachs represents is the opposite of what Henry Ford represents:

 

Ford - don't make money by how much less you can give for a dollar from the customer, but by trying to always give more for a dollar from the customer.

Goldman is the exact opposite. 

 

I think it is not an accomplishment to be rich and be able to afford a car when everyone else is on horses in the early 20th century, but it is an accomplishment to drive the cost of a car so low as to make everyone be able to afford it - this is called progress.

 

Goldman does not help progress - it merely tries to get as rich as it possibly can without contributing to it.

 

Hey guys,

 

I wanted to get people's thoughts on the huge compensation numbers set aside for employees of Goldman Sachs.

 

In the recent quarter compensation and benefits expenses (including salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as payroll taxes, severance costs and benefits) were 6.65 billion. In Q1 this number was 4.71 billion. The total for 2009 so far is 11.36 billion with two quarters left in the year!

 

I understand Goldman's franchise has gotten much stronger with the weakening of many competitors but in light of the substantial amount of government support both indirect and direct, the compensation numbers don't sit well with my gut.

 

This all is more of a concern for me through my ownership of Goldman through Berkshire. I know high compensation numbers mean good results at Goldman that benefit Berkshire's investment. Although, in my limited understanding it seems like Goldman was on the brink of failure much the same way other firms were and they were saved by the AIG bailout and all the government support. Given the substantial risks the employees put Goldman Sachs franchise in, the compensation numbers seem like the wrong incentive.

 

Any thoughts would be appreciated!

 

 

[savant]

eh? I don't quite extol banking as a great career option or anything but just as an fyi -

 

The large part of the money made by Goldman is from their trading business - not their investment banking. In trading there are no pitchbooks.

 

If you take the average number of hours spent by an investment banking analyst compared to the the 6 figure sum that they make at the end of the year it comes to about $7 - $10 an hour. Not exactly top pay if you ask me. Whether those hours spent are used in a way to create something valuable for society is a different topic altogether.

 

They dont have algorithms doing the pitchbooks because the only way to learn a sales pitch so that an analyst can get to the sales level of a managing director is to work on the pitch book. Although a sales job at the end of the day, it is slightly more sophisticated and with a different client base.

 

That being said, not all bankers are bad. You simply have 5% of them providing 95% of the value.

 

The problem with Goldman Sachs is not that they are using taxpayer money and not paying back (they did pay back) nor is it with their ability to allocate capital.  The problem with Goldman Sachs is what it represents - that financing and speculation are better rewarded in society than building and innovating.

 

It speaks to what we currently reward the most - that trading things around should be more beneficial than creating and providing high quality products and services.

 

If you are just out of college, and you work as a banker - what exactly do you do? You are an "excel monkey" - you do data entry and you make sure the pitchbook is formatted correctly. For this you are paid well into the 6-digits.

 

80% of that work can be done by a smart computer algorithm nowadays, and unless you are higher rank than a VP, you don't get to interact with the customer that much anyways.

 

Why is the computer algorithm not there to do the data entry and the formatting? Because unlike the internet, the banking industry is not "open".  It is governed by habits, and old tradition.  So banking, especially investment banking, is a very "labor intensive" industry. 

 

Did you know a lot of banks actually have people changing the stock price in their Pitchbooks MANUALLY every day as the stock price changes?? Did you know you can generate 80% of the content of a pitchbook by writing a smart google spreadsheet in less than 1 hour?

 

And did you know you can earn 200-400k/year writing these pitchbooks using the dumbest methods known to man ? Nobody doing this kind of work should be paid that much considering the much cheaper alternative is there.  The banks don't adopt it because the higher-ups don't know much about tech and they can still earn healthy margins without it.

 

I can care less about the TARP money, I get more angry when i see people doing things that can be done at 1 dollar and charging 100 dollars for it. 

 

What Goldman Sachs represents is the opposite of what Henry Ford represents:

 

Ford - don't make money by how much less you can give for a dollar from the customer, but by trying to always give more for a dollar from the customer.

Goldman is the exact opposite. 

 

I think it is not an accomplishment to be rich and be able to afford a car when everyone else is on horses in the early 20th century, but it is an accomplishment to drive the cost of a car so low as to make everyone be able to afford it - this is called progress.

 

Goldman does not help progress - it merely tries to get as rich as it possibly can without contributing to it.

 

[benhacker]

Just thought this was a bit odd, so I wanted to say something:

Savant,

 

If you take the average number of hours spent by an investment banking analyst compared to the the 6 figure sum that they make at the end of the year it comes to about $7 - $10 an hour.

 

It has been a while since you personally made $10/hour I'm guessing. :-)  Every single person in this forum who is not so distant from those times of our lives is probably laughing at this statement, or maybe crying at how someone could make enough to make that math error.

 

$100,000 / year divided by $10 / hour = 10,000... divided by 52 weeks = 192 / week implied work time. 

 

There are only 168 hours in a week, so those must be some wild bankers you know. ;-)  Now whether it is a $20/hour job, or a $40/hour job, or just a $10/hour job may not be (is not) critical to the point you were trying to make, but as a 28 year old who used to work in live sewers (I'm not exaggerating...) for less than $10 / hour, rounding error in your statement was not lost on me...

 

Ben - no longer making < $10 / hour... or working in sewers... :)

[yudeng2004]

Sorry, I was merely expressing my view of why I dislike Goldman.  I don't think the TARP money or bonuses are the problem - but rather that money is being paid in a way that does not justify the value of that particular kind of labor.

 

If you invent the cure for cancer, you should be paid a few trillion.  However, ibanks and especially Goldman, want to promote this model in which you sit near the pipes of capital flow and try to suck as many drops out of a leak here or there.

 

When a Goldman banker get richer, society does not get incrementally richer because of it.

 

There are two kinds of efficient capital allocation:

1) to increase cash flow in terms of monetary capital

2) to increase the productivity of labor through the introduction of technology or management paradigm shifts

 

Paying someone 200k-400k/year to do fancy data entry is a embarrassment to both those two points.

 

Progress will always threaten the relative economic power of a portion of people, so they will do whatever it takes to prevent it.

 

But to be completely honest, I think the greatest fear of these people is that they are replaceable, that they are not special. The threat to their egos is even a greater concern than the economic consequences of improved efficiency.

 

If 5% of the people provide 95% of the value, then the rest 95% of the labor can and should be replaced by automation.  Just because a lot of automation is not mainstream yet does not mean the value is not there.  Our society will have a much lower cost for banking services.

 

We drive down the cost of service in every field we engage in (consumer goods, insurance products, etc) but why do we not reduce the cost of the banking services? Society would be better off for it.

 

eh? I don't quite extol banking as a great career option or anything but just as an fyi -

 

The large part of the money made by Goldman is from their trading business - not their investment banking. In trading there are no pitchbooks.

 

If you take the average number of hours spent by an investment banking analyst compared to the the 6 figure sum that they make at the end of the year it comes to about $7 - $10 an hour. Not exactly top pay if you ask me. Whether those hours spent are used in a way to create something valuable for society is a different topic altogether.

 

They dont have algorithms doing the pitchbooks because the only way to learn a sales pitch so that an analyst can get to the sales level of a managing director is to work on the pitch book. Although a sales job at the end of the day, it is slightly more sophisticated and with a different client base.

 

That being said, not all bankers are bad. You simply have 5% of them providing 95% of the value.

 

The problem with Goldman Sachs is not that they are using taxpayer money and not paying back (they did pay back) nor is it with their ability to allocate capital.  The problem with Goldman Sachs is what it represents - that financing and speculation are better rewarded in society than building and innovating.

 

It speaks to what we currently reward the most - that trading things around should be more beneficial than creating and providing high quality products and services.

 

If you are just out of college, and you work as a banker - what exactly do you do? You are an "excel monkey" - you do data entry and you make sure the pitchbook is formatted correctly. For this you are paid well into the 6-digits.

 

80% of that work can be done by a smart computer algorithm nowadays, and unless you are higher rank than a VP, you don't get to interact with the customer that much anyways.

 

Why is the computer algorithm not there to do the data entry and the formatting? Because unlike the internet, the banking industry is not "open".  It is governed by habits, and old tradition.  So banking, especially investment banking, is a very "labor intensive" industry. 

 

Did you know a lot of banks actually have people changing the stock price in their Pitchbooks MANUALLY every day as the stock price changes?? Did you know you can generate 80% of the content of a pitchbook by writing a smart google spreadsheet in less than 1 hour?

 

And did you know you can earn 200-400k/year writing these pitchbooks using the dumbest methods known to man ? Nobody doing this kind of work should be paid that much considering the much cheaper alternative is there.  The banks don't adopt it because the higher-ups don't know much about tech and they can still earn healthy margins without it.

 

I can care less about the TARP money, I get more angry when i see people doing things that can be done at 1 dollar and charging 100 dollars for it. 

 

What Goldman Sachs represents is the opposite of what Henry Ford represents:

 

Ford - don't make money by how much less you can give for a dollar from the customer, but by trying to always give more for a dollar from the customer.

Goldman is the exact opposite. 

 

I think it is not an accomplishment to be rich and be able to afford a car when everyone else is on horses in the early 20th century, but it is an accomplishment to drive the cost of a car so low as to make everyone be able to afford it - this is called progress.

 

Goldman does not help progress - it merely tries to get as rich as it possibly can without contributing to it.

 

[arbitragr]

You're right yudeng ... there's probably not alot of social benefits to GS' trading activities for society.

However we live in a capitalist society, and what gets compensated the most isn't necessarily the most socially beneficial.

Some examples; highly paid sports stars - why on earth do we pay people 10M+ a year to kick or hit a ball around?? I'm not sure either, but people like to watch these athletes and as a result they get paid for it. Some may even consider the entertainment value of watching these athletes "socially beneficial", despite the fact that it makes them less productive because they sit around all day and watch the TV or go to the game at the stadium.

Or in the past, tobacco companies ... great product from a financial perspective, great business model, hugely profitable, great compensation, but socially disastrous for people.

 

In terms of trading vs. curing cancer ... I think what you're referring to is financial capitalism vs. production capitalism. Technology increases the production factor in the economy, helping making it more efficient and to some extent socially beneficial. However, traders could argue that what they're doing is maintaining the price function of the economy ... i.e. helping financial markets maintain proper price discovery in a range of asset classes and commodities, oil, interest rates, securities prices for example. Traders and financiers, also marshal capital to the economic actors who make use of it best, and firms like Goldman improve the sophistication and facilitation of capital flow of these markets, they can of course sometimes go overboard, like what we've seen with the exotic instruments during the credit crisis, but that is part and parcel of capitalism - a cycle of risk, failure and success. So economically speaking, traders do serve some capitalistic function, albeit a less socially beneficial one vis-a-vis say, renewable energy engineers.

 

Having said that, I would venture to say that for every 1 trader at Goldman Sachs, there are probably thousands of failed traders who enter and exit the market pool of traders constantly. Just look at the retrenchments in the financial sector. So I wouldn't say that GS represents a large enough population of traders to the extent that our allocation of human capital goes disproportionately to trading activities and financial capitalism - it's just like aspiring athletes who don't make the cut, and then decide on a different career path. For those that don't make it into Goldman they find other avenues of work, which probably in all likelihood will fall somewhere within the production function sphere of the economy.

 

[yudeng2004]

I agree with most of your points - but I wouldn't draw the analogy to sports stars.

 

Most sports stars are pretty unique products, in that there really aren't another 100 people out there who could do their jobs better.

 

While I agree with the marginal benefit of traders in terms of providing liquidity as well as keeping prices in line with value, I was mostly referring to bankers - not traders - and especially the 95% of bankers who are below Managing Director.

 

A lot of these Managing Directors or Executive Directors are pretty irreplaceable due to their personal connections, but it is the junior bankers that I have a problem with.

 

My main point was that 90% of the jobs people do at Goldman or other banks are labor intensive, have not much intellectual requirement, and mostly involve fancy data entry and Excel work.

 

These jobs on average pay 200k-400k per year, and there are tens of thousands of them in the financial sector.  The question is why do these people get to use very backward methods to do a job that modern technology already has many many answers for while being paid like stars.

 

Sports star pay actually make economic sense in that no matter how much the economy grows, there will simply be no more than that many people who can actually play at the highest level.  So their value is increased since society is getting richer while their own numbers are not increasing.  And nobody would watch sports if athletes were replaced by robots (and robot tech is nowhere good enough to replace them right now).

 

Most of the junior bankers' job, however, should be automated, since they are repetitive data entry jobs.

 

The key point here is how replaceable these bankers are.  These jobs are not rocket science or brain surgery - they are just labor-intensive (due to unwillingness to use tech more than anything else) repetitive tasks.  These jobs should not be commanding mid-6-digit salaries.

 

Top athletes and top traders are unique talents, so they get paid for the uniqueness.  Bankers are mostly labor, but are paid like talents - this is the biggest problem.

 

 

 

 

 

You're right yudeng ... there's probably not alot of social benefits to GS' trading activities for society.

However we live in a capitalist society, and what gets compensated the most isn't necessarily the most socially beneficial.

Some examples; highly paid sports stars - why on earth do we pay people 10M+ a year to kick or hit a ball around?? I'm not sure either, but people like to watch these athletes and as a result they get paid for it. Some may even consider the entertainment value of watching these athletes "socially beneficial", despite the fact that it makes them less productive because they sit around all day and watch the TV or go to the game at the stadium.

Or in the past, tobacco companies ... great product from a financial perspective, great business model, hugely profitable, great compensation, but socially disastrous for people.

 

In terms of trading vs. curing cancer ... I think what you're referring to is financial capitalism vs. production capitalism. Technology increases the production factor in the economy, helping making it more efficient and to some extent socially beneficial. However, traders could argue that what they're doing is maintaining the price function of the economy ... i.e. helping financial markets maintain proper price discovery in a range of asset classes and commodities, oil, interest rates, securities prices for example. Traders and financiers, also marshal capital to the economic actors who make use of it best, and firms like Goldman improve the sophistication and facilitation of capital flow of these markets, they can of course sometimes go overboard, like what we've seen with the exotic instruments during the credit crisis, but that is part and parcel of capitalism - a cycle of risk, failure and success. So economically speaking, traders do serve some capitalistic function, albeit a less socially beneficial one vis-a-vis say, renewable energy engineers.

 

Having said that, I would venture to say that for every 1 trader at Goldman Sachs, there are probably thousands of failed traders who enter and exit the market pool of traders constantly. Just look at the retrenchments in the financial sector. So I wouldn't say that GS represents a large enough population of traders to the extent that our allocation of human capital goes disproportionately to trading activities and financial capitalism - it's just like aspiring athletes who don't make the cut, and then decide on a different career path. For those that don't make it into Goldman they find other avenues of work, which probably in all likelihood will fall somewhere within the production function sphere of the economy.

 

[Grenville]

In the process of reading through Andrew Cuomo's Bank Bonus Report and I found this chart very interesting. It's nice to see the distinction between banks and relative compensation levels.

 

Here is a link to the report:

http://www.oag.state.ny.us/media_center/2009/july/july30a_09.html

 

The chart is attached below.

 

[Grenville]

Interesting article regarding a few GS Japan employees forming a union and tough Japanese labor law restrictions on layoffs.

 

"Threatened Goldman Japan workers unionize

Financial giant butts against tough domestic labor law as it seeks to slim down workforce"

http://www.japantimes.co.jp/text/fl20120228zg.html

 

[Grenville]

An eye opening op-ed letter from a resigning managing director who has been with the firm for 12 years and was director and head of the US equity derivatives business in Europe, Middle East & North Africa.

 

He essentially outlines the decline of the culture from one where making money trumps doing the right thing for the client. He also states that if things don't change, the firm will eventually decline...wow.

 

Why I Am Leaving Goldman Sachs

By GREG SMITH

http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=2&pagewanted=1&src=twr

[Grenville]

Zgrendi,

 

Take my thoughts with a grain of salt since I've never worked at a bank and its just my thoughts from the outside looking in.

 

Based on my read of his letter, the firm was different when he first arrived and has changed with time. I also agree that money can be a very strong motivator and can make people do things that they wouldn't necessarily do if money wasn't involved. The individual has probably made plenty of money in his time with the firm, but for me, its the fact that he has publicly aired his grievances to a major publication like the NY Times. That's not an easy thing to do.

 

I agree that most firms dealing with GS should be sophisticated but you hear the stories of the town or city that got talked into a swap that they probably shouldn't have. It may also emphasize the conflict of interest in running an Ibank and a prop trading desk.

 

...

 

 

[Grenville]

It's also important to note that it is the opinion of one employee and may not be a true reflection of what's going on inside.

[vinod1]

I think he is pissed off at something or some promotion that he did not get and this is his way of getting back and covering himself up in glory. I think the culture at all IB was always "buyer beware". I would not put too much faith in someone who has worked for 12 years at an IB and suddenly realizes that the IB is not putting the clients first.

 

I sold my GS calls yesterday at close so I do not have any stake now.

 

Vinod

[onyx1]

Too funny!  This guy is not a Managing Director.  He is an Executive Director in europe, which is the equivalent to a Vice President in the USA.  This is not a senior position with responsibility and I guarantee he does not run a department with any substance or risk authority.  I smell a rat here. 

 

I will watch with amusement over the next few days at those who succumb to confirmation bias and claim this is proof of what they knew all along!

 

[Kraven]

Too funny!  This guy is not a Managing Director.  He is an Executive Director in europe, which is the equivalent to a Vice President in the USA.  This is not a senior position with responsibility and I guarantee he does not run a department with any substance or risk authority.  I smell a rat here. 

 

I will watch with amusement over the next few days at those who succumb to confirmation bias and claim this is proof of what they knew all along!

 

Exactly.  The amusing thing is that the general public hears a term like "Executive Director" or "Vice President" and thinks it's a high level, senior position.  When in truth, basically everyone with a pulse who has been around more than about 5 minutes gets that title.