Perhaps the most wounding indictment yet of Goldman Sachs came not from federal regulators but from within its own ivory tower.
Goldman Sachs Group Inc. has weathered a lot of criticism over the years, but nothing like the broadside that hit it from inside.
A departing executive in the investment bank's London office accused Goldman in a newspaper column Wednesday of losing its moral compass and being overtaken by a greed-infested corporate culture.
"I can honestly say that the environment now is as toxic and destructive as I have ever seen it," Greg Smith, who quit as head of the firm's U.S. equity derivatives business in Europe, wrote in an opinion piece in the New York Times.
"It makes me ill how callously people talk about ripping their clients off," Smith wrote. "Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets,' sometimes in internal e-mails."
Smith's basic accusation -- that Goldman pursues its own profit at the expense of its customers -- is well-known to Wall Street insiders and has been a frequent refrain among Goldman critics who blame the firm for contributing to the 2008 global financial crisis.
But Wall Street was shocked by the public denunciation, and it set off a lively debate about everything from Goldman's business practices to the motivations of its accuser.
"This is all over the Street. This is the talk of the town," said Larry Doyle, president of Greenwich Investment Management and a former trader at several banks. "He just took a howitzer and blew the entire firm away."
Goldman denied the accusations, saying in a statement that "we disagree with the views expressed, which we don't think reflect the way we run our business."
In a memo to employees, Lloyd Blankfein, Goldman's chief executive, suggested that Smith may have a grudge against the company.
"In a company of our size, it is not shocking that some people could feel disgruntled," Blankfein and another top executive wrote. "But that does not and should not represent our firm of more than 30,000 people."
Reaction varied widely.
Smith's piece was titled "Why I Am Leaving Goldman Sachs," and it ended by saying he resigned Wednesday after a dozen years there.
Many rank-and-file people on Wall Street viewed it as a parting shot by a disenchanted employee who nonetheless collected bonuses for a dozen years, said William Cohan, author of the 2011 book "Money and Power: How Goldman Sachs Came to Rule the World."
The timing of the diatribe -- after 2011 bonuses had been paid early this year -- prompted speculation that Smith may have kept his thoughts to himself until his paycheck was cashed.
The mood on Wall Street, always a bare-knuckle place, has grown increasingly tense as the industry suffers through a depressing period of sagging profits and lower employee bonuses brought on by the soft U.S. economy and heightened regulation.
"What I'm hearing is sour grapes, and you've just pigged out at the trough for 12 years and you don't have enough sense to keep your mouth shut," Cohan said. "We don't know this guy's story. We don't know why he'd do this. There are a lot of disgruntled people who leave Wall Street, and they don't do this."
Others saw it as a well-intentioned attempt to reposition Goldman's moral antenna.
"I thought it very thoughtful, even kind of a touching piece," said Matt Taibbi, a Rolling Stone reporter who has written several blistering articles about Goldman.
Smith contended in his piece that Goldman routinely profits at the expense of customers. Rather than recommending a promising stock to a client, for example, Goldman pushes the ones the firm wants to dump, he wrote.
Making gobs of money is, of course, the raison d'être on Wall Street. But such blatant hoodwinking of customers is considered a step too far.
"Integrity? It is eroding," wrote Smith, who could not be reached for comment. "I don't know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client's goals? Absolutely. Every day, in fact."