“Why I Left Goldman Sachs: A Wall Street Story” by Greg Smith – A Book Review

A search on Google for Goldman Sachs returns 328 million results. Created in 1869, Goldman Sachs rose quickly to be a favorite banks in the US for IPO’s and later for investment banking. Its history was always tied to acquisitions of trading funds and various financial instruments. And of course, during the sub-prime crisis in 2007, Goldman Sachs became even more famous for short-selling mortgage backed securities right before the market for those instruments collapsed. A close competitor of Lehman Brothers, Goldman Sachs allegedly partly maneuvered its sibling into bankruptcy, thus securing an even better position in the investment banking industry. With $29 billion in assets and a surprising repurchase of the government injection of cash into its share, Goldman Sachs remains one of the most mysterious investment banks on Earth.

No wonder that Greg Smith’s financial book (“Why I Left Goldman Sachs: A Wall Street Story”) was expected with so much interest. As an ex-employee of the bank’s New York HQ, Smith was always critical of Goldman Sachs failing its own standards and the bank’s reference of customers such as “muppets” – after he left the bank in 2006. Thus, it comes as no surprise that this account of an investment banker’s life in Sachs is … well… critical of it. It is also not surprising that the book made the no.1 spot for most book retailers, including Amazon.

Greg Smith was at the time of leaving the head of credit derivatives for EMEA (Europe, Middle East and Africa), so he had a good knowledge of the bank’s internal procedures. He left the bank with a bomb-shell column in New York Times. This might not be the fairest way of leaving an employer. It could actually might even break the code of conduct that Goldman Sachs was breaking very often itself, but this is a different story.

The book is written at the first person and it is actually quite precise and descriptive. Even if you are not into the ivnestment banking, it is still fascinating to see how the big multinationals are shaping the lives of their employees…

“Why I Left Goldman Sachs: A Wall Street Story” is not necessarily a financial book, but rather a book about the growing disappointment of a banker who thought he was working on the light side. The book tells the story of the bank who came under water with its risky investments and bets on derivatives, just to be saved by the TARP US program or Warren Buffet (or both). The financial book also tells the story of how the the bank became a money making machine by exploiting its very own customers. Of course, some of it is a marketing stunt, however there is no reason to believe that Smith lied into its pages anywhere.

Some book reviewers (e.g. MarketWatch or the Wall Street Journal) have reacted very quickly and very critical of Greg Smith, saying that the book comes with no real surprises. Downplaying has long been a PR practice and I think their counter-reaction came a bit too soon, which might make “Why I Left Goldman Sachs: A Wall Street Story” even more interesting. After all, why would Goldman Sachs pay such negative reviews if its image was not at stake?

I am very curious how much this book will impact Goldman Sachs’ image on the market. In the meanwhile, “Why I Left Goldman Sachs: A Wall Street Story” remains a fast paced lecture with a rare insight into one of the financial world’s behemoths intestines. Enjoy!