This week, just as the S&P 500 was reaching its apogee in the long, slow recovery from the subprime mortgage meltdown, a mid-level executive resigned from Goldman Sachs. He did it in an unusual place: on the op-ed page of The New York Times.
In "Why I am leaving Goldman Sachs," Greg Smith explained that the culture of the firm has become "toxic," that the Wall Street investment bank is focused almost entirely on making money for itself rather than for its clients.
"I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm," he wrote. "This view is becoming increasingly unpopular at Goldman Sachs." Elsewhere he wrote, "I truly believe that this decline in the firm's moral fiber represents the single most serious threat to its long-run survival."
Wall Street has always played for keeps. It's not a place for seminarians. But Smith's indictment of Goldman is significant because all financial transactions rely on trust. Without it, business is impossible. And the moral climate that Smith describes is emblematic of too many business institutions, or perhaps institutions generally, in this country.
The pursuit of wealth to the exclusion of all else, even to the point of taking advantage of one's clients, will kill American capitalism if it continues.
Look at Russia. Look at China. Why are many people wary of doing business in those nations? Because the rule of law and the sanctity of a contract are not the moral gold standard there. When the pursuit of gold itself becomes the only standard, you don't have an economy. You have organized crime.
Smith named names. He laid the firm's moral decay at the feet of chief executive officer Lloyd C. Blankfein and president Gary D. Cohn. Smith wrote that when he started at Goldman more than a decade ago, the corporate culture was different than it is today. Then it turned on "always doing right by our clients."
Through a spokeswoman, Goldman denied Smith's claims. "In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves."
Smith can be ignored as a disgruntled employee. But his piece has resonance for two reasons.
First, he obviously has sacrificed his chances of ever working on Wall Street again. Second, his claims mirror testimony that emerged from congressional hearings after the subprime greedfest.
Ultimately, Smith is right. If Wall Street doesn't clean up its act, there will be no act left to clean up.