Investment bank J.P. Morgan tried to contain damage to Wall Street's reputation on Thursday by telling staff not to try to profit from rival Goldman Sachs' embarrassment over a vitriolic resignation letter published in the New York Times. Equity derivatives salesman Greg Smith caused a firestorm across the banking industry on Wednesday with the letter, published as an opinion column and calling Goldman a "toxic" place to work where senior staff saw clients as "muppets".
J.P. Morgan Chase & Co Chief Executive Jamie Dimon warned employees in an internal memo not to seek advantage from Goldman's "alleged issues", imploring them focus on standards, not on the furore stirred by Smith in what media and bloggers have called "Muppetgate".
"I want to be clear that I don't want anyone here to seek advantage from a competitor's alleged issues or hearsay - ever. It's not the way we do business," Dimon said in the memo, a copy of which was seen by Reuters. Dimon's memo, awaiting Asia employees in their e-mail inboxes on Thursday morning, was sent to the bank's global operating committee and later forwarded to wider parts of J.P. Morgan, said sources who have seen the memo.
J.P. Morgan declined to comment. London-based Smith, who had worked for Goldman for almost 12 years, called the bank a "toxic and destructive" place. "It makes me ill how callously people talk about ripping their clients off," he said in the letter. "Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets'."
The storm goes to the heart of the reputational crisis in investment banking since public opinion started blaming the industry for its role in the 2008 banking crisis which brought the global financial system close to collapse. "This could be just a disgruntled employee, but it comes at a time when the industry is not having a great time," said a senior mergers and acquisitions adviser. "Franchises can be affected by things like this," this person said.
Goldman said in its official response on Wednesday that the bank disagreed with the views expressed by Smith, "which we don't think reflect the way we run our business." With the whole industry in a brighter spotlight since 2008, Goldman has faced a series of incidents that threaten to tarnish its image in particular. Earlier this month accused of a conflict of interest for advising El Paso Corp on its sale to Kinder Morgan, in which the bank was a significant shareholder.
Sources at banks including Citi, Credit Suisse and Nomura said they were not aware of any memo similar to Dimon's at their respective firms. While Goldman Sachs is attempting to play down the Smith letter, the firm's shares fell 3.4 percent in trading in New York on Wednesday, and its impact has become a topic of discussion among its employees. "It's definitely got people talking in the office," said an Asia-based Goldman Sachs trader who did not want to be named.
"It's amusing honestly because perceptions depend on the individual. For every one person who has something malicious to say about the company, you'll find 10 others who have a 180 (degrees different) view," the trader said. Several former Goldman Sachs employees who worked at the company before its initial public offering said the firm's culture did change after it got listed, as Smith alleges, with bankers increasingly under the gun to boost profit.
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