(SOURCE: The Conversation)

Greg Smith’s very public resignation from Goldman Sachs through the opinion pages of the New York Times punctured a rally of questionable value.

Greg Smith’s expose on Goldman Sachs could reframe the debate on regulatory reform – but is business media on board? AAP

Reducing capital requirements at this stage remains hotly contested. It also reopened debate on whether ostensibly stricter regulatory oversight has effected lasting change on Wall Street.

Goldman Sachs are playing down Smith’s explosive allegations.

Smith certainly didn’t think so. “I can honestly say the environment is now as toxic and destructive as I’ve ever seen it,” he wrote. “To put the problem in its simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money.”

Goldman Sachs, understandably, downplayed the standing of the complainant. It disputed that a systematic ethical malaise existed within the bank. In a memo to staff, the firm noted “it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper that speaks louder than the regular, detailed and intensive feedback you have provided the firm”.

This misses the point.

The power of the attack has little to do with its veracity. Its strength derives from its initial placement in such a prestigious outlet, its timing and subsequent viral social media dissemination. Not since the infamous depiction of Goldman Sachs as a giant “vampire squid” by Rolling Stone has a banking and financial regulation story attracted such public interest. As such, it has the capacity to reframe debate on what constitutes corporate and regulatory purpose.

The controversy highlights the constellation of interests at play in the dynamics of financial regulation. It also reflects the critical intermediating role played by the media. Regulatory strategies focus on competing (if partially understood) narratives, one of which gains media and, therefore, political, traction. It is essential to “own” the media agenda, a fact reluctantly acknowledged by Goldman Sachs.

The firm has received backing from within citadels of business journalism. That an investment bank ever was or should have been seen as a “Make-A Wish Foundation” reflects, according to the Bloomberg editors, stunning naïveté on the part of Mr Smith.

“If you want to dedicate your life to serving humanity, do not go to work for Goldman Sachs. That’s not its function, and it never will be,” wrote the Bloomberg editors. “Go to work for Goldman Sachs if you wish to work hard and get paid more than you deserve even so. (Or if you want to make your living selling derivatives but don’t know what a derivative is, as Smith concedes in passing that he didn’t at first.)”

In shooting the messenger, Bloomberg forces as much consideration of its editorial priorities as on the problems of ascertaining the extent to which Goldman Sachs has effective mechanisms to ensure cultural values are embedded in practice. The fact that the article is signed by the editors makes the intervention even more extraordinary. It raises even more questions about the purpose of business journalism than a now notorious on-air 2009 rant by Rick Santelli.

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