Goldman Sachs was the only news story Wednesday on Wall Street.
For anyone unfamiliar with the story, a former executive at the company, Greg Smith, wrote an op-ed in the New York Times, in which he stated that he resigned because of the company's "toxic and destructive" culture. He said managing directors referred to their own clients as "muppets."
The news was all over the financial media, and Goldman Chief Executive Lloyd Blankfein issued a letter rebutting the op-ed piece.
Goldman has been one of the biggest targets of the far left over the past few years. The firm was called a “great vampire squid” by a "journalist" for Rolling Stone in 2009. The anger was supposedly because Goldman had received bailout money and was paying large bonuses. However, for some reason, liberals didn't direct their anger at other banks which received money and paid large bonuses.
There has been enough written about whether the employee was right or wrong, but no one would dispute that he was a relatively low-level employee.
It was only less than a few hours before some opportunist politicians got involved and bashed Goldman.
The Wall Street Journal reported that Smith’s letter was being read by representatives and senators in Washington, DC. Some congressmen wasted no time to go on record in attacking Goldman.
Rep. Elijah Cummings, D., Md., described the culture at Goldman as “corrosive.” He also stated: “Even after Goldman received a $10 billion taxpayer bailout and paid the largest SEC settlement in history for misleading its investors, it still hasn’t learned the lessons of the 2008 financial collapse.”
What lessons Cummings is referring to are quite unclear. Other Democratic senators also took a swipe at the firm. There likely will be more coming until the media gets bored of the story.
This is important for two reasons: the financial aspects and the political aspects.
Analysts are worried that this could harm Goldman's stellar reputation.
Goldman is the top choice of the brightest students leaving college. Forbes magazine even demanded the ouster of Blankfein. The stock dropped over 4 percent amid the controversy.
The political aspects are important as well and tie into the financial ones. If corporations started to be viewed as evil and corrupt, it could hurt business in America. Pressure would be raised on politicians to pass regulation to punish the “evil firms.”
This could also be an election issue. Mitt Romney was formerly the CEO of Bain Capital, one of the largest private equity firms in the country. While many view the business experience as a positive, Romney has been attacked for being a “corporate raider.”
The Goldman article has the potential to affect the political climate and financial climate, if the media doesn't get bored with the story anytime soon.
(Disclosure: The author of this article has no position in Goldman Sachs.)
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