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Goldman Sachs CEO Lloyd Blankfein testifies before a Senate investigative committee on Capitol Hill in Washington, DC, April 27, 2010. Investment bank Goldman Sachs January 11, 2011 pledged a new era of transparency and commitment to customers' interests after taking a beating over its role in the US financial crisis. (JIM WATSON/AFP/Getty Images)
Goldman Sachs CEO Lloyd Blankfein testifies before a Senate investigative committee on Capitol Hill in Washington, DC, April 27, 2010. Investment bank Goldman Sachs January 11, 2011 pledged a new era of transparency and commitment to customers' interests after taking a beating over its role in the US financial crisis. (JIM WATSON/AFP/Getty Images)

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A dramatic end to Goldman's code of silence Add to ...

Greg Smith’s biggest impact on Goldman Sachs may have been the manner in which he departed. On Wednesday, the equity derivatives banker kissed goodbye to his employer of a dozen years with a resignation letter, published in the New York Times op-ed pages, in which he accused Goldman of putting its interests ahead of those of clients, who he said are regularly described as “muppets.”

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Though Mr. Smith’s complaints may be familiar, they tend to be aired in private. The worry for Goldman is that some employees are no longer scared of criticizing the firm, nor take much pride in its pedigree.

It’s not hard to pick holes in Mr. Smith’s broadside. His Goldman career doesn’t seem to have been stellar. After more than a decade he was still an executive director when most bankers would hope to have made it to managing director or even partner. And his misty-eyed description of Goldman’s principled past sounds stretched. When Mr. Smith joined, Goldman – and the rest of Wall Street – was flogging speculative Internet start-ups to tech-mad investors – hardly a case study for prioritizing clients’ long-term interests.

And Mr. Smith’s description will hold few surprises for those familiar with the Securities and Exchange Commission’s case against the firm over its structuring of toxic sub-prime mortgage debt.

Indeed, the complaint that Goldman puts its own interests first can be regularly heard from customers, counterparties and even ex-employees. If Mr. Smith’s letter is an accurate reflection of reality – he offers no specific evidence – it is just another reminder of how far Goldman still has to go in rediscovering former senior partner Gus Levy’s mantra of being “long-term greedy.”

What’s unusual is for criticism to spill into the open. Despite its recent travails, Goldman has managed to keep internal disputes private, while even disgruntled clients have tended to keep quiet. Goldman’s famed ability to maintain close links with its alumni – who in the past wore their tenure as a badge of pride rather than disavowing it the way Mr. Smith has – also persuades most ex-employees to keep their counsel.

Mr. Smith’s chances of continuing a career in finance look slim. Rivals will think twice before hiring someone willing to air his dirty laundry. But for Goldman, which just named a new communications chief, the challenge will be discouraging others from following Mr. Smith’s lead.

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