Greg Smith, the former Goldman Sachs vice president who notoriously resigned from the investment banking behemoth in a New York Times op-ed in March claimed the bank and Wall Street are taking advantage of uninformed clients to make money during an interview on CBS News' "60 Minutes."
Clients that didn't understand complex investments or how Goldman Sachs structured its fees are a boon to the company, Smith said. Many of these clients include pension funds that put ordinary Americans' retirement savings at risk when they invest with Goldman and other banks.
"Getting an unsophisticated client is the golden prize," Smith told Anderson Cooper. "The quickest way to make money on Wall Street is to take the most sophisticated product and try to sell it the least sophisticated client."
Smith appeared on "60 Minutes" to promote his book, "Why I Left Goldman Sachs: A Wall Street Story," which will land on bookstore shelves Monday. The Huffington Post obtained an advance copy of the book, which contains accusations that Goldman Sachs advises clients to make investments while betting against the same investments, that employees derisively described clients as "Muppets," that interns were mistreated, and that Smith once saw CEO Lloyd Blankfein naked.
"The client increasingly came to be regarded as a counterparty, merely the other side of a transaction, rather than an advisee," Smith wrote in the book.
But despite the harsh accusations, Smith claimed during the interview that he had the best interests of the firm at heart when he publicly resigned.
"This might be hard for people at Goldman Sachs to understand but I loved the place. I put a lot of my heart and soul into it. I don't view it as a betrayal," Smith told Cooper of his public break-up with the bank, where he worked for 12 years before quitting at age 33. "I actually think the leaders of Goldman Sachs today don't have the long-run interests of the institution at heart," he said Sunday.
Smith's book adds detail to the charges he made in the New York Times, including that Goldman has developed a "toxic and destructive" corporate culture.
"It makes me ill how callously people talk about ripping their clients off, Smith wrote in his March op-ed. "It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you."
Airing Goldman Sachs' dirty laundry in public is the best way to force the company to change its ways, Smith told Cooper.
"There are a lot of people who acknowledge things internally," Smith said. "But no one is willing it say it publicly and my view is, the only way you force people to change the system is by saying something publicly."
Smith warned no one at the firm of his impending resignation or the New York Times op-ed, he said on "60 Minutes." He did claim however that he went to nine senior partners at the firm with his concerns before resigning.
Goldman rejects Smith's accusations that the company puts its own interests ahead of its clients and conducted an internal investigation aiming to disprove the charges. Smith really abandoned Goldman because his superiors refused to promote him to managing director and more than double his salary to more than $1 million, the company says. Blankfein told CBNC this month that he's "not really concerned about the revelations."
Smith said he "absolutely" would have left Goldman Sachs even if they had agreed to his promotion and salary increase. With his book completed, Smith doesn't know what his next move will be. "I was not doing this in order to get hired at another Wall Street bank."
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8. U.S. Bank
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Total assets as of March 31, 2012: $820 billion. (Federal Reserve) (AP)
5. Goldman Sachs
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4. Wells Fargo
Total assets as of March 31, 2012: $1.33 trillion. (Federal Reserve) (AP Photo/CX Matiash)
Total assets as of March 31, 2012: $1.94 trillion. (Federal Reserve) (AP Photo/Mark Lennihan, File)
2. Bank of America
Total assets as of March 31, 2012: $2.18 trillion. (Federal Reserve) (AP Photo/Chuck Burton, File)
1. JPMorgan Chase
Total assets as of March 31, 2012: $2.32 trillion. (Federal Reserve) (AP Photo/J. Scott Applewhite, File)