But dozens of interviews with people working in finance in London over the past months for the banking blog suggest that it's not only Goldman Sachs where clients are treated like "muppets" getting their "eyeballs" ripped out. And it's not only clients that are exploited. Investment banks treat their own employees exactly the same way.
Investment banking breaks roughly into two main areas: the financial markets that Smith was working in, and deal-making such as mergers and acquisitions. This is how a young banker in M&A at a major bank described his experiences:
"There's this idea of bankers, especially in a prestigious sector like M&A, as very sophisticated and civil. But you do hear things like 'We're gonna suck this client dry.' … When we'd discuss a pitch or potential project with the team, nine out of 10 times the first question would be: 'Where's the "fee event" ? How can we make money from this ?' I mean, I understand banks need to make money, but you can't think of yourself as 'trusted adviser' – the big term in M&A – while at the same time putting your own fee first?"
Or listen to this risk and compliance officer at another major bank:
"I remember in my first few weeks I sat down with one of the structured products guys. He was selling so-called PFI deals, where local authorities buy a complicated financial instrument to pay for, say, a hospital. I asked him: where's the benefit for the local authorities in this? He was aghast. "What are you, a socialist?""
Smith's letter is ultimately about loyalty between a bank and its clients, and the alleged lack thereof at Goldman Sachs. This word "loyalty" comes up in many interviews, but mostly when people describe their relation to their own bank. Here's a head of marketing at a bank in the City: "Anyone here can lose their job at any time. One moment you're working on a project, the next you're hugging and saying, 'Well, bye' because the other has just been made redundant and is being led out of the building by security."
That's right. In most financial firms you can be marched out of the building by security at five minutes' notice. Your email is blocked, as well as your phone and your security pass, and there you are, literally on the pavement as you wait for someone else to collect your personal stuff from your desk. An IT consultant with another bank said: "People just disappear. They're called in, fired and led out. And you don't get info on who has been made redundant."
I could give many more quotes like these. In fact, almost everyone in finance has a redundancy horror story to tell. This banker recently got "the call". Looking back, she said:
"I may have been overly loyal to my dysfunctional family – the bank I worked in. I was making £80,000 a year, not including bonuses – though bonuses were negligible in the last few years. I could have made more, probably, had I done what many do: change jobs every 18 months to two years. Come in, make an impact, and move on … This summer I turned down a pretty awesome job, as I was dedicated to my bank. I am not sure if this is a female thing, to be overly loyal, but it's definitely a mistake I'll never make again."
There is no reason to feel sorry for people in investment banks, and I've met very few, if any, who want our pity. They enter the sector of their own free will, they earn well (though rarely the "telephone number bonuses" you read about) and nobody forces them to stay. But people working in banks are on their own and their employer has zero loyalty to them. One wonders: how realistic is it to expect investment bankers to treat clients any better than they are treated themselves?
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