I think it's safe to say that the vampire squid Goldman Sachs brand has taken a few hits in recent years. To add to the calumny, Greg Smith, an executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa, is leaving Goldman today after publishing an op-ed in the New York Times explaining why he's leaving.  It's not pretty:

Today is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

Man, that best-of-luck office party is going to be awkward. 

The fact that this op-ed has already spawned its own satire suggests that it's not going to have much of an effect on the larger debate on Goldman Sachs. Which is a shame, because such a debate would be pretty useful when thinking about Big Finance (though see Gabriel Sherman's excellent New York essay on this topic from a few weeks back). Indeed, this is a teachable moment for how to compose a memo, or a mission statement, or an op-ed that will provoke a deep debate over corporate culture.  Let's see where Smith went wrong: 

1)  He made it all about himself. The ostensible point of this exercise is to shine a light on a shady corporate culture that values sins over virtues. In these instances, the following paragraph should never appear: 

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore.       

See how that was ostensibly about Goldman Sachs but was really about the author?  Not a good sign. 

2)  His job apparently required him to burrow out and reside in a large soundproof hole in the ground. Let's take a look at what Smith said about the halcyon, early days of his Goldman Sachs tenure -- i.e., when he started in 2000:

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients....

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. 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. 

Excuse me for a sec, I need to do this for a spell. 

Look, Smith should know the Goldman Sachs culture better than I do, but as an outsider, I am fairly certain of two things:  A)  Before Smith's op-ed, the terms "humility" and "Goldman Sachs" never appeared in the same sentence.... ever; and  B)  Making money was always how people got promoted at Goldman Sachs. 

There's been enough written about Goldman Sachs to know that by 2006, the firm had recognized that it was badly overexposed in the subprime market and decided to dump their holdings onto their clients. We know that in 2007, the firm went so far out of bounds that the SEC actually brought a civil suit against them, securing a $550 million settlement more than 18 months ago. And now Smith notices something is amiss??!! While the Wall Street Journal suggests Smith's role at Goldman wasn't pivotal, this kind of naivite requires a special kind of willful blindness. 

If you're going to be a whistle-blower, you need to acknowledge upfront your complicity in any malfeasance, be it legal or ethical. Smith's op-ed doesn't come close to doing this. 

One of the paradoxes I tried to highlight in my recent review of finance books was that it was paradoxical to claim simultaneously that capital markets were becoming more efficient even as the financial sector hoovered up an ever greater share of profits and skilled human capital. So I'm pretty sympathetic to the argument that market incentives in the United States are too heavily skewed towards a career of high finance.  

Skewed incentives, however, are not the same thing as skewed values. Unfortunately, the New York Times stable of columnists is blurring the distinction. For Exhibit A, let's look at this segment of Tom Friedman's column from the weekend: 

We had a values breakdown — a national epidemic of get-rich-quickism and something-for-nothingism. Wall Street may have been dealing the dope, but our lawmakers encouraged it. And far too many of us were happy to buy the dot-com and subprime crack for quick prosperity highs.

Ask yourself: What made our Greatest Generation great? First, the problems they faced were huge, merciless and inescapable: the Depression, Nazism and Soviet Communism. Second, the Greatest Generation’s leaders were never afraid to ask Americans to sacrifice. Third, that generation was ready to sacrifice, and pull together, for the good of the country. And fourth, because they were ready to do hard things, they earned global leadership the only way you can, by saying: “Follow me.”

Contrast that with the Baby Boomer Generation. Our big problems are unfolding incrementally — the decline in U.S. education, competitiveness and infrastructure, as well as oil addiction and climate change. Our generation’s leaders never dare utter the word “sacrifice.” All solutions must be painless. Which drug would you like? A stimulus from Democrats or a tax cut from Republicans? A national energy policy? Too hard. For a decade we sent our best minds not to make computer chips in Silicon Valley but to make poker chips on Wall Street, while telling ourselves we could have the American dream — a home — without saving and investing, for nothing down and nothing to pay for two years. Our leadership message to the world (except for our brave soldiers): “After you.”

For Exhibit B, here's David Brooks from Friday:

After decades of affluence, the U.S. has drifted away from the hardheaded practical mentality that built the nation’s wealth in the first place.

The shift is evident at all levels of society. First, the elites. America’s brightest minds have been abandoning industry and technical enterprise in favor of more prestigious but less productive fields like law, finance, consulting and nonprofit activism.

It would be embarrassing or at least countercultural for an Ivy League grad to go to Akron and work for a small manufacturing company. By contrast, in 2007, 58 percent of male Harvard graduates and 43 percent of female graduates went into finance and consulting....

[T]he value shifts are real. Up and down society, people are moving away from commercial, productive activities and toward pleasant, enlightened but less productive ones. 

OK, I'm calling a Vizzini foul on the word "values" here. 

A broad spectrum of American saved less over the past decade because they were responding rationally to massive asset appreciation. High-skilled Americans went into finance because it paid remarkably well. Americans didn't do these things because they suddenly got lazy. Indeed, the opposite was true, if U.S. labor productivity figures are any guide. And while much calumny has been heaped upon Wall Street in the past few years, is anyone actually accusing bankers of either not working hard enough or not putting in enough hours?

Americans haven't suddenly gotten contemptuous of either saving or manufacturing. They were responding to the price signals that the market communicated to them.

This is great news, by the way. Changing values is really, really hard. Shifting material incentives is not exactly easy, but it's much more doable than fomenting a values shift.

I suspect that ranting writing only about incentives and not about values makes better copy. That said, I'd prefer it if the most influential op-ed columnists in the land correctly diagnosed what ails the American political economy rather than saying "distemper" or "an imbalance of humors." 

In the wake of financial regulation moving its way through Congress, both the Washington Post and Politico have stories out on Wall Street's backlash against the Democrats.  The Post's lead: 

A revolt among big donors on Wall Street is hurting fundraising for the Democrats' two congressional campaign committees, with contributions from the world's financial capital down 65 percent from two years ago.

The drop in support comes from many of the same bankers, hedge fund executives and financial services chief executives who are most upset about the financial regulatory reform bill that House Democrats passed last week with almost no Republican support. The Senate expects to take up the measure this month.

This fundraising free fall from the New York area has left Democrats with diminished resources to defend their House and Senate majorities in November's midterm elections. Although the Democratic Senatorial Campaign Committee and the Democratic Congressional Campaign Committee have seen just a 16 percent drop in overall donations compared with this stage of the 2008 campaign, party leaders are concerned about the loss of big-dollar donors.

And now Politico: 

With the financial reform bill likely to hit President Barack Obama’s desk in coming weeks, Wall Street's top political players are warning Democrats to brace themselves for the next phase of the fight: the fundraising blowback.

Democrats who backed the bill  are finding big banks far less eager to host fundraisers and provide campaign cash heading into the tightly contested midterm elections this fall, insiders say.

Some banks, in fact, have discussed not attending or hosting fundraisers at all for the next few months. Goldman Sachs is already staying away from all fundraisers, according to two sources. The company would not comment.

“I think at least in the short term there is going to be a great deal of frustration with people who were beating the hell out of us — then turning around and asking for money,” said a senior executive of a Wall Street bank.

Based on these stories, when if the Democrats get hammered come November, expect a lot of pixels and ink spilled on the awesome power of the financial sector to get what it wants in Washington.  And don't believe a word of it. 

This is the lobbying equivalent of a good but struggling baseball club calling a team meeting right before they play the worst ballclub in the league.  That is to say, sports managers often save their rousing speeches before a game they're pretty likely to win, so they can claim that their motivation was what led their team to victory. 

As Charlie Cook notes, the Democrats are heading into a Category 5 political disaster come November.  This has nothing to do with FinReg, and everything to do with a struggling economy, an ecological disaster in the Gulf, fired-up conservatives, and disaffected liberals.  Wall Street antipathy is really the least of their problems. 

I'm laying this marker down now -- unless we see some shocking upsets among the New York delegation (the real target of Wall Street's ire), analysts who proclaim the awesome political power of financial sector will be doing so with sloppy facts and sloppy argumentation. 

In recent years, I've seen some very... let's say exaggerated arguments about the power of political lobbies in Washington.  They do possess political influence, but much of that influence rests on the perception that they can make or break electoral fortunes.  In Wall Street's case, however, they're pushing on a door that was already wide open. 

Which is not surprising.  Powerful interests tend to apportion their money to candidates they think will win.  Indeed, to use a term of art, Wall Street's political preferences appear to be -- dare I say it -- pro-cyclical.