Goldman's Greg Smith Is the Latest Buddhist Convert From the 1%

NEW YORK ( TheStreet) -- There's a maxim I'm reminded of when members of the 1% speak as if they're breaking from the elite: It's easy to become a Buddhist after you've made your first million.

That's what struck me when I was trying to put the New York Times op-ed from former Goldman Sachs ( GS) derivatives vice president Greg Smith in perspective.

The situation is similar to when Warren Buffett of Berkshire Hathaway ( BRK.B) talks about how it's shameful that he doesn't pay more taxes on his $45 billion in net worth. That one calls to mind Hollywood celebrities finding peace in a yogi's retreat in India after CMG has signed them to a long-term deal and another blockbuster is raking in hundreds of millions at the box office.

Another example: When former Russian oil tycoon Mikhail Khodorkovsky -- awarded the riches of Russia's natural resources for a song and dance back when the Soviet Union broke up -- began calling for democracy with an eye toward becoming the country's president, was it a sign of a higher road by a member of the 1% or simply a move for someone who had already been made comfortable enough by capitalist excess to say and do whatever he wanted?

The answer to this question doesn't really matter and, frankly, I don't think there's a straightforward answer.

How does Greg Smith fit into this? Is he still a member of the 1% or now entering the 99%, or is he just mad at his former employer and will next turn up at the helm of the JPMorgan derivatives desk (probably unlikely) for which the 99% will still despise him? Should the 99% hate Goldman more than the rest of Wall Street's profit-oriented, if they are inclined to hate to begin with?

I'm not sure how much is gained in the public's understanding of Goldman Sachs as a result of Smith's missive, any more than we can calculate what was lost when Warren Buffett referred to Lloyd Blankfein as the brother he never had and waved around the subprime CDO Abacus deal sheet at Berkshire Hathaway's annual meeting to signal the "all clear" when it comes to integrity for Goldman. All that occurred while Goldman was still facing fraud charges from the Securities and Exchange Commission.

Who is greedier: The pension fund duped by Goldman into a bad investment because it is chasing returns, or Goldman for taking advantage of that greed to achieve its higher level of greed?

As Buffett argued in his nauseating defense of Goldman, any investor should have been able to make sense of the Abacus deal sheet if they were investing in it, and that's true to some degree, though it's a simple-minded defense of a raw deal by a man a lot smarter than that.

Positions staked out on Goldman have always been extreme. Support of Goldman, as in the case of Buffett, or hatred of the firm and all it represents -- the Vampire Squid cottage industry -- is still the dividing line. Is adding one more voice breaking out from inside the machine the tipping point in our understanding of Goldman and why its own form of capitalist greed is different from the rest of Wall Street's?

Capitalism will always be more complicated than any extreme opinion would have you believe it is, and trotting out Goldman is a convenient way of saying one member of the flock has strayed as opposed to dealing with a flock that is collectively wayward and hemmed in by contradictions.

After all, I can argue sarcastically that Smith is categorically wrong in saying Goldman is more interested in its own profits than those of its biggest institutional clients by pointing out that a former Goldman board member was passing inside information to one of the largest hedge funds in the world, Raj Ratnaram's Galleon Group.

That's going the extra -- in this case criminal -- mile for your most important clients. Goldman didn't want to take credit for that bit of "premium" client relations, but I would say it tells us as much about Wall Street's relationship with the biggest institutional investors as does Smith's attack on Goldman as a profit hoarder that has stopped representing the interests of the Middle East sovereign wealth funds, hedge funds and pension giants.

Goldman shares are down more than 3% Wednesday and instead of no-selling the Smith op-ed, the firm came out with a strong public relations offensive -- dismissing Smith as a low-level VP, and also running well-timed ads on CNBC, and having CEO Blankfein take a break from "God's work" to respond directly.

It's ironic that the op-ed came a day after the release of the Federal Reserve stress tests and a major rally in the banking sector, as some firms on life support just three years ago after the subprime meltdown announced major dividend hikes and share buybacks with the Fed's blessing.

Indeed, it's the market analysis of the latest Goldman negative headline that may say the most, and the 3% decline as many other banks rose, seems like the real damage. I don't think it's because of what Smith said, but rather the subtext.

"People who care only about making money will not sustain this firm -- or the trust of its clients -- for very much longer," he wrote.

The attack on Goldman's toxic culture designed only for making money also comes during a week when President Obama and the Congress are trying to push through a piece of legislation that will erase investor protections built up through decades and strengthened in the past decade in direct response to Enron and the dot.com bubble, a "jobs" act viewed by critics as doing the bidding of the banks and venture capitalists.

In the post-Vampire Squid era, with the bank ban on proprietary trading and the boring old world of commercial loans and mortgages back to being the bread-and-butter of the financial system, it's that much tougher for Goldman to do what it does best in gaming the constrained but still convoluted world of trading. That world is changing, but not enough to make a Buddhist of a capitalist, a member of the 1% a member of the 99%, or add even more tentacles to the Vampire Squid.

Consider this: One of the ironies of the Smith Goldman "dis" is that neither Warren Buffett, his compatriot in calling out Wall Street greed, or JPMorgan, Goldman Sachs' peer company, would likely hire him, the latter being an opinion expressed by Bloomberg's William Cohan on Tuesday, who called Smith "toast" as far as all of Wall Street is concerned.

Buffett is famous for deriding the same "toxic and destructive" nature of Wall Street called out by Smith, just not specifically when it comes to Goldman. Which one of them is right? The right answer might still be both of them, and it's just that Goldman's tentacles will always have the longest reach.

-- Written by Eric Rosenbaum from New York.

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