People know that there is something deeply wrong with the system, but very few can put their finger on what the problem is. After the crash in 1929, the U.S. Senate conducted the Pecora Hearings, to investigate the causes of the crash. This inquiry led to real reforms that held banks accountable and eliminated the abusive practices that had caused the stock market crash. This was followed by decades of calm in the financial system. If I achieve one thing with this book, I hope it will be to empower some people with enough understanding to call their congressman, congresswoman, or senator and ask this question: Why don't you have the guts to do the same thing?
Author's Note
Everything I discuss in this book is as I remember it from my twelve-year career at Goldman Sachs. My goal was to use my career and experiences at Goldman Sachs to tell a story about a system and an industry that has become rife with conflicts of interest that encourage-and sometimes require-individuals to push ethical boundaries and compromise their integrity in order to succeed.
Because my goal was to bring light to the system-and not to individuals-I have changed names or descriptors for some people.
The stories I tell are from memory, and I have tried to reconstruct the dialogue as closely and accurately as possible to retain the spirit of how they originally occurred. Any errors in fact, of omission or commission, are my responsibility alone.
My main hesitation in publishing the op-ed was not the argument I was making-which I believed in strongly-but rather the moral question of writing a broad statement about an organization, and an industry, that has thousands and thousands of honest people who are going in to work every day, doing their jobs, working hard for their families. Many of these people have been tremendously kind to me over the years, both inside and outside of work.
But after dozens of conversations with colleagues over the twelve months before I left, I saw how many shared my disappointment in a system that more and more asks for morally dubious decision making. Sometimes, when you see people doing things, and they are getting away with it, and they are making money, the human brain tells you that it must be okay. But sometimes it isn't.
This helped clarify my decision. If I write the op-ed, and it contributes in some small way to a more ethical system, then all those people will hopefully be better off in the long run If I write the op-ed, and it contributes in some small way to a more ethical system, then all those people will hopefully be better off in the long run. My goal for the op-ed, and for this book, is a constructive, not a destructive, one: to try to improve a system by bringing transparency and accountability to it.
Acknowledgments
First of all, I would like to thank Grand Central, for giving me the opportunity to write this book. My publisher, Jamie Raab, was a class act: knowledgeable and thoughtful from our first meeting, and consistent throughout. I am grateful to the whole team at Grand Central (in particular Kallie Shimek and Meredith Haggerty) for all their hard work and expertise.
I have never written a book before-and I have not worked with editors-but I have to think that John Brodie must be one of the best in the business. Equal parts kindness, wit, knowledge, and perceptiveness, I have appreciated his thoughtful guidance, and his capacity and willingness to listen to me from day one. Throughout the process, I felt lucky to have him by my side.
I would like to thank the following people for all their help and integrity: Jonathan Leibner, Paul Fedorko, Jen Rohrer, Tess Dmitrovsky, Sammy Bina, Fred Newman, Sheryl Galler, and Mark Levine.
I would also like to thank James Kaplan for his wisdom and invaluable help during this process.
I am so grateful to have been with my brother, Mark (in person), and my best friends, Lex Bayer and Dan Lipkin (on Skype), just minutes after the op-ed was published. None of them knew it was coming but it was so comforting to have them with me, and to have their advice and friendship, which I value so highly.
My close group of friends rallied to my side and supported me without question immediately: Jackie, Phil, Adam, Amitav, Ariel, Shimrit, Michael, Alexandra, Dov, Gavin, Sean, Jody, Sentheel, Brian, Ralph, Rowan, Hayley, Kevin, Alon, Gopal, John, and Kris. Thank you for being some of the most decent people and best friends a guy could ask for.
I have a very special family whom I rely on and love very much. Thank you to my aunt Pat; my brother, Mark, who teaches me so much; my best mate Carly, who is such an inspiration for me; my dad, for showing bravery in taking his pharmacy exam and moving to America; and my mom, for all she has done for me in my life.
Thank you also to Mr. Elliot Wolf, Mr. Digby Ricci, Jim Montoya, and Jon Reider.
A Glossary of Trader-Speak
Agent: The person or entity who executes a trade on behalf of the client on an exchange, without committing the bank's own capital to facilitate the trade. Also see: The person or entity who executes a trade on behalf of the client on an exchange, without committing the bank's own capital to facilitate the trade. Also see: PRINCIPAL PRINCIPAL.
Analyst: A recent college graduate; the most junior title on Wall Street. A recent college graduate; the most junior title on Wall Street.
Asset management: The professional management of securities such as stocks, bonds, commodities, and derivatives in order to meet specified investment goals for the benefit of investors such as pension funds, endowments, sovereign wealth funds, and individuals. The professional management of securities such as stocks, bonds, commodities, and derivatives in order to meet specified investment goals for the benefit of investors such as pension funds, endowments, sovereign wealth funds, and individuals.
Associate: Typically an MBA graduate or an analyst who has been at the firm for three or more years. "Associate" is the second most junior title on Wall Street. Typically an MBA graduate or an analyst who has been at the firm for three or more years. "Associate" is the second most junior title on Wall Street.
Attribution: The sum total of gross credits (GCs) that sits next to a salesperson's name-i.e., how much bacon he or she brought home from client business. Also see: The sum total of gross credits (GCs) that sits next to a salesperson's name-i.e., how much bacon he or she brought home from client business. Also see: GC (GROSS CREDIT). GC (GROSS CREDIT).
Axe: Wall Streetspeak for the stock or other product a firm tries to get rid of by persuading clients to invest in it: because it is not seen as having a lot of potential profit for the firm. Wall Streetspeak for the stock or other product a firm tries to get rid of by persuading clients to invest in it: because it is not seen as having a lot of potential profit for the firm.
Bid-offer spread: The difference between the lowest price someone is willing to sell at (the offer) and the highest price someone is willing to buy for (the bid). The market maker is often able to capture part of this spread as profit. The difference between the lowest price someone is willing to sell at (the offer) and the highest price someone is willing to buy for (the bid). The market maker is often able to capture part of this spread as profit.
Bigs: Slang for the original big S&P 500 futures contracts that trade in the open-outcry pits of the Chicago Mercantile Exchange. Bigs were surpassed in popularity by the E-mini futures contracts, which are one-fifth the notional size and which trade electronically almost twenty-four hours a day. Slang for the original big S&P 500 futures contracts that trade in the open-outcry pits of the Chicago Mercantile Exchange. Bigs were surpassed in popularity by the E-mini futures contracts, which are one-fifth the notional size and which trade electronically almost twenty-four hours a day.
Bip: Wall Street slang for basis point, a unit equal to one-hundredth of a percentage point. If an asset moved 1 percent, you might say it moved 100 bips. Wall Street slang for basis point, a unit equal to one-hundredth of a percentage point. If an asset moved 1 percent, you might say it moved 100 bips.
Blocking and tackling: The day-to-day basic tasks of servicing clients on a sales and trading floor: picking up the lines, taking orders, stamping tickets, executing trades, confirming prices with clients. The day-to-day basic tasks of servicing clients on a sales and trading floor: picking up the lines, taking orders, stamping tickets, executing trades, confirming prices with clients.
Bloomberg Terminal: A computer system that is the industry standard news and market data service that people on Wall Street use to get real-time information and to communicate with one another and with clients. Bloomberg L.P. is the company founded by the mayor of New York, Michael Bloomberg. A computer system that is the industry standard news and market data service that people on Wall Street use to get real-time information and to communicate with one another and with clients. Bloomberg L.P. is the company founded by the mayor of New York, Michael Bloomberg.
Bloomie: Slang for a message you may send to a client using the messaging feature on your Bloomberg Terminal. Communicating via Bloomies and Bloomie chat rooms or instant messages has become ubiquitous in the industry-even more common than speaking on the phone. Slang for a message you may send to a client using the messaging feature on your Bloomberg Terminal. Communicating via Bloomies and Bloomie chat rooms or instant messages has become ubiquitous in the industry-even more common than speaking on the phone.
Blown up: Description used for a trader who goes out of business or loses a significant amount of money because of a poorly timed trade. Description used for a trader who goes out of business or loses a significant amount of money because of a poorly timed trade.
Buck: Wall Street slang for $1 million. "That hedge fund just traded five hundred bucks of silver futures without blinking." "His loft in Tribeca cost eight bucks." Wall Street slang for $1 million. "That hedge fund just traded five hundred bucks of silver futures without blinking." "His loft in Tribeca cost eight bucks."
Call option: A type of derivative that gives the purchaser the right to buy an underlying security at a stipulated price in the future. A type of derivative that gives the purchaser the right to buy an underlying security at a stipulated price in the future.
CDO (collateralized debt obligation): A type of security that played a significant role in inflating the real estate bubble, the subsequent 2008 crash, and the downfall of Bear Stearns, Lehman, Merrill Lynch, Wachovia, and Washington Mutual. CDOs package mortgages together and serve to connect investor capital with the U.S. housing market. Significant fees accrue to the investment bank and everyone along the mortgage supply chain. A type of security that played a significant role in inflating the real estate bubble, the subsequent 2008 crash, and the downfall of Bear Stearns, Lehman, Merrill Lynch, Wachovia, and Washington Mutual. CDOs package mortgages together and serve to connect investor capital with the U.S. housing market. Significant fees accrue to the investment bank and everyone along the mortgage supply chain.
CDS (credit-default swap): An opaque derivative that serves as a type of insurance policy an investor can buy to protect against the default or bankruptcy of a company, a mortgage, or even a sovereign nation. The seller collects a premium from the buyer for the insurance, but agrees to deliver a certain payoff to the buyer if default does occur. AIG ultimately took a $170 billion taxpayer bailout partly because of overexposure to CDS protection it had sold on the real estate market. An opaque derivative that serves as a type of insurance policy an investor can buy to protect against the default or bankruptcy of a company, a mortgage, or even a sovereign nation. The seller collects a premium from the buyer for the insurance, but agrees to deliver a certain payoff to the buyer if default does occur. AIG ultimately took a $170 billion taxpayer bailout partly because of overexposure to CDS protection it had sold on the real estate market.
Cheap as chips, mate!: The way a British colleague would tell you that something was bargain-basement dirt cheap. The way a British colleague would tell you that something was bargain-basement dirt cheap.
Chinese wall: An information barrier that separates people on the public side of the business (sales and trading, asset management, research) from people on the private side who have access to material information that has not been made public yet (investment banking, corporate finance, mergers and acquisitions); designed to limit conflicts of interest within investment banks. An information barrier that separates people on the public side of the business (sales and trading, asset management, research) from people on the private side who have access to material information that has not been made public yet (investment banking, corporate finance, mergers and acquisitions); designed to limit conflicts of interest within investment banks.
Commercial killer: Someone who is particularly adept at bringing in business; usually the quickest way to rise up in the company. Someone who is particularly adept at bringing in business; usually the quickest way to rise up in the company.
Commission: An agreed-upon fee a customer pays for transactions with the firm (e.g., 2 cents per share, 50 cents per futures contract). An agreed-upon fee a customer pays for transactions with the firm (e.g., 2 cents per share, 50 cents per futures contract).
Culture carrier: Someone who is particularly good at retaining and spreading the culture, values, and tradition of the firm to those around him or her. Someone who is particularly good at retaining and spreading the culture, values, and tradition of the firm to those around him or her.
Custy: Wall Street slang for "customer" or "client." Wall Street slang for "customer" or "client."
Derivative: A catch-all term for options, swaps, futures, exotics, and structured products. In general, a derivative derives its value from some underlying security such as a stock, bond, commodity, or index. A catch-all term for options, swaps, futures, exotics, and structured products. In general, a derivative derives its value from some underlying security such as a stock, bond, commodity, or index.
D/K: The short form for "don't know"; used when a client claims not to recognize a trade or its details and tries to stick you with it. It is used on Wall Street also to denote any form of rejection, as in: "Ouch, Rick got brutally d/k'ed when he tried to ask that girl out." The short form for "don't know"; used when a client claims not to recognize a trade or its details and tries to stick you with it. It is used on Wall Street also to denote any form of rejection, as in: "Ouch, Rick got brutally d/k'ed when he tried to ask that girl out."
Don't be a dick for a tick: Said to a client who is haggling over pennies, or a tick, i.e., the smallest increment by which a security can change. Said to a client who is haggling over pennies, or a tick, i.e., the smallest increment by which a security can change.
Don't get sore, buy some more: Said to get clients to keep trading even if their order is moving against them and they are losing money. Said to get clients to keep trading even if their order is moving against them and they are losing money.
Dressin' British, thinkin' Yiddish: A nod to the tailored suits in London, and the founders of the firm. A nod to the tailored suits in London, and the founders of the firm.
Elephant trade: A trade that brings in more than $1 million to the firm in one hit. A trade that brings in more than $1 million to the firm in one hit.
E-mini: The most liquid and most popular futures contract in the world, trading hundreds of billions of dollars per day. It is the first instrument of choice for hedge funds because of its supreme liquidity and the fact that it trades electronically for almost twenty-four hours a day. The most liquid and most popular futures contract in the world, trading hundreds of billions of dollars per day. It is the first instrument of choice for hedge funds because of its supreme liquidity and the fact that it trades electronically for almost twenty-four hours a day.
ETF (exchange-traded fund): An investment fund that acts like a stock and is designed to mimic the performance of indexes (e.g., the S&P 500) or a commodity, such as gold, which would otherwise be difficult for a retail investor to get exposure to. An investment fund that acts like a stock and is designed to mimic the performance of indexes (e.g., the S&P 500) or a commodity, such as gold, which would otherwise be difficult for a retail investor to get exposure to.
Exchange-traded: Listed on an exchange with a public market that is transparent. Also see: Listed on an exchange with a public market that is transparent. Also see: OTC (OVER THE COUNTER). OTC (OVER THE COUNTER).
Exotic: A type of dancer. Also: a type of derivative that is far more complex than a plain-vanilla derivative and requires sophisticated models to value it accurately. A very profitable, high-margin product for Wall Street. Also see: A type of dancer. Also: a type of derivative that is far more complex than a plain-vanilla derivative and requires sophisticated models to value it accurately. A very profitable, high-margin product for Wall Street. Also see: STRUCTURED PRODUCT STRUCTURED PRODUCT, OPAQUE OPAQUE.
Fast market: Originally a stock exchange term to indicate extreme volatility, but now an excuse used by busy traders with too many balls in the air to help someone: "I'm in a fast market here. Back the fuck off." Also see: Originally a stock exchange term to indicate extreme volatility, but now an excuse used by busy traders with too many balls in the air to help someone: "I'm in a fast market here. Back the fuck off." Also see: SHIT SHOW SHIT SHOW.
Fast money: Typically, hedge funds that trade a lot and move in and out of positions very frequently. Typically, hedge funds that trade a lot and move in and out of positions very frequently.
Fat-finger: To make a trading error by hitting the wrong button or too many buttons because of clumsy fingers. If you add three extra zeros to the size of your order, for example, it can have a huge multibillion-dollar adverse impact on the market. To make a trading error by hitting the wrong button or too many buttons because of clumsy fingers. If you add three extra zeros to the size of your order, for example, it can have a huge multibillion-dollar adverse impact on the market.
Fill or kill: A trade order instruction a client gives a broker that means "execute it immediately and completely, or not at all" (i.e., cancel it). A trade order instruction a client gives a broker that means "execute it immediately and completely, or not at all" (i.e., cancel it).
Futures contract: A derivatives contract between buyer and seller where price and quantity are agreed upon today, but delivery and payment occur in the future. The term originated with farmers who were trying to hedge their crops against droughts, rains, and uncertainty of demand. A derivatives contract between buyer and seller where price and quantity are agreed upon today, but delivery and payment occur in the future. The term originated with farmers who were trying to hedge their crops against droughts, rains, and uncertainty of demand.
G: Wall Street slang for $1,000. Usage: "Randy's bull market trip to the Bahamas set him back eight Gs." Wall Street slang for $1,000. Usage: "Randy's bull market trip to the Bahamas set him back eight Gs."
GC (gross credit): The term used for how much revenue each salesperson is bringing into the firm from each client. Also see: The term used for how much revenue each salesperson is bringing into the firm from each client. Also see: ATTRIBUTION ATTRIBUTION.
Handle: A term to describe the general level where a security is trading. If Google were trading at $634, you would say it was trading with a 6 handle. Or, applied to civilian life, "Jim put on so much weight, he is now trading with a 3 handle" (i.e., more than 300 pounds). A term to describe the general level where a security is trading. If Google were trading at $634, you would say it was trading with a 6 handle. Or, applied to civilian life, "Jim put on so much weight, he is now trading with a 3 handle" (i.e., more than 300 pounds).
Hedge fund: An investment fund that can undertake a wide range of strategies, including using leverage and derivatives, both going long (buying) and getting short (selling, without actually owning the asset). Because hedge funds are not highly regulated, they are only open to very large investors, such as pension funds, university endowments, and high-net-worth individuals. An investment fund that can undertake a wide range of strategies, including using leverage and derivatives, both going long (buying) and getting short (selling, without actually owning the asset). Because hedge funds are not highly regulated, they are only open to very large investors, such as pension funds, university endowments, and high-net-worth individuals.
High-net-worth individuals: A polite term for people who are mega-rich or loaded. A polite term for people who are mega-rich or loaded.
Hit a bid: To sell something at the price the market maker is willing to pay for it (i.e., the bid price). To sell something at the price the market maker is willing to pay for it (i.e., the bid price).
Hit the tape: Complete the trade; or the announcement of some news. It originates from the ticker tape that was used to transmit stock price information from 1870. Wall Streeters use this term all the time: "My new kid hit the tape" (i.e., we had a new baby). "Ben and Kelly are dating? When did that hit the tape?" Complete the trade; or the announcement of some news. It originates from the ticker tape that was used to transmit stock price information from 1870. Wall Streeters use this term all the time: "My new kid hit the tape" (i.e., we had a new baby). "Ben and Kelly are dating? When did that hit the tape?"
Hoot: A little intercom on everyone's desk that is used to make announcements to the whole trading floor. A little intercom on everyone's desk that is used to make announcements to the whole trading floor.
Hundo, hunge: Wall Street slang for $100. Usage: "My Hermes tie cost me two hundo." "Dinner at Per Se? Eight hundo, minimum." Wall Street slang for $100. Usage: "My Hermes tie cost me two hundo." "Dinner at Per Se? Eight hundo, minimum."
I see: Corporate-speak for "Go fuck yourself," as in: "Um, Peter, we're going to need you to go ahead and come in to the office on Saturday." "I see." Corporate-speak for "Go fuck yourself," as in: "Um, Peter, we're going to need you to go ahead and come in to the office on Saturday." "I see."
Illiquid: Very difficult to trade because of lack of buyers and sellers. Trading in and out of illiquid securities can have an outsize impact on the market. Very difficult to trade because of lack of buyers and sellers. Trading in and out of illiquid securities can have an outsize impact on the market.
Investment banking business: The private side of the investment bank that helps corporations, governments, and individuals raise capital by underwriting the issuance of securities; and also gives companies advice on merging with or acquiring other companies. Also see: The private side of the investment bank that helps corporations, governments, and individuals raise capital by underwriting the issuance of securities; and also gives companies advice on merging with or acquiring other companies. Also see: IPO IPO IPO (initial public offering): A stock market launch where shares of stock in a company are sold to the general public for the first time, on a securities exchange. Through this process, a private company transforms into a public company. A stock market launch where shares of stock in a company are sold to the general public for the first time, on a securities exchange. Through this process, a private company transforms into a public company.
Leverage: A tool for multiplying one's gains or losses by either borrowing money or trading derivatives. Leading into the financial crisis, the banks were leveraged thirty to one-i.e., they were borrowing and betting thirty dollars for every one dollar they actually had. A tool for multiplying one's gains or losses by either borrowing money or trading derivatives. Leading into the financial crisis, the banks were leveraged thirty to one-i.e., they were borrowing and betting thirty dollars for every one dollar they actually had.
Levered money: A term for hedge funds, who often use leverage to multiply their possible returns. A term for hedge funds, who often use leverage to multiply their possible returns.
Lift an offer: To buy something for the price at which the market maker is willing to sell it (i.e., the offer price). To buy something for the price at which the market maker is willing to sell it (i.e., the offer price).
Liquid: Very easy to trade, with limited impact (lots of buyers and sellers available in the marketplace). Very easy to trade, with limited impact (lots of buyers and sellers available in the marketplace).
Make a market: To show a client a principal risk price-both a buy and a sell price-on a security it is looking to trade. The firm risks its own capital but stands to make a spread or commission on the trade. Also see: To show a client a principal risk price-both a buy and a sell price-on a security it is looking to trade. The firm risks its own capital but stands to make a spread or commission on the trade. Also see: BID-OFFER SPREAD, PRINCIPAL BID-OFFER SPREAD, PRINCIPAL.
Managing director: Second most senior rank; usually, but not always, a team leader who makes more than $1 million a year. Second most senior rank; usually, but not always, a team leader who makes more than $1 million a year.
Mark to market: An accounting term generally interpreted to mean to value your positions accurately, or "square up," at the end of each trading day instead of waiting until the end of the month. An accounting term generally interpreted to mean to value your positions accurately, or "square up," at the end of each trading day instead of waiting until the end of the month.
Market color: Commentary offered to clients on the themes being seen in the marketplace; advice given to clients on how to implement these themes by trading securities. Commentary offered to clients on the themes being seen in the marketplace; advice given to clients on how to implement these themes by trading securities.
Muppet: A furry, cute puppet. Also: British slang for "idiot." A furry, cute puppet. Also: British slang for "idiot."
Mutual fund: A regulated and professionally managed collective investment scheme that pools money from many investors, including the general public, to purchase securities such as stocks and bonds. A regulated and professionally managed collective investment scheme that pools money from many investors, including the general public, to purchase securities such as stocks and bonds.
Noted: Corporate-speak for "Blow me," as in: "Oh, hey, Peter, we're going to need you to go ahead and be more diligent submitting those TPS reports." "Noted." Corporate-speak for "Blow me," as in: "Oh, hey, Peter, we're going to need you to go ahead and be more diligent submitting those TPS reports." "Noted."
Notional value: The total value of a leveraged position's assets. Commonly used in the options, futures, and derivatives markets because a very small amount of invested money can control a large position (and have a large consequence for the trader). The total value of a leveraged position's assets. Commonly used in the options, futures, and derivatives markets because a very small amount of invested money can control a large position (and have a large consequence for the trader).
On the hop: Wall Street term for "immediately," as in: "I need you to pick up that client on the hop. He has a trade to execute." Wall Street term for "immediately," as in: "I need you to pick up that client on the hop. He has a trade to execute."
On the wire: Wall Street terminology for "immediately over the phone" or in real time. When a client asks for a price, sometimes the salesperson has to consult with his trader and then call the client back. Really demanding clients stay on the phone to receive their price and then make a decision "on the wire." Wall Street terminology for "immediately over the phone" or in real time. When a client asks for a price, sometimes the salesperson has to consult with his trader and then call the client back. Really demanding clients stay on the phone to receive their price and then make a decision "on the wire."
Opaque: Not transparent; sometimes hard to understand or to value correctly. Typically used in reference to complicated derivative products. Also see: Not transparent; sometimes hard to understand or to value correctly. Typically used in reference to complicated derivative products. Also see: EXOTIC, OTC (OVER THE COUNTER), STRUCTURED PRODUCT. EXOTIC, OTC (OVER THE COUNTER), STRUCTURED PRODUCT.
Open outcry: The old-school method of trading on exchanges such as the Chicago Mercantile Exchange, where people stand in a pit and shout orders back and forth and use hand signals to communicate amid the chaos. In the past decade, most securities have transitioned from open outcry to electronically traded. Also see: The old-school method of trading on exchanges such as the Chicago Mercantile Exchange, where people stand in a pit and shout orders back and forth and use hand signals to communicate amid the chaos. In the past decade, most securities have transitioned from open outcry to electronically traded. Also see: E-MINI E-MINI.
Option: A type of derivative that gives the purchaser the right to buy or sell an underlying security at a stipulated price in the future. Also see: A type of derivative that gives the purchaser the right to buy or sell an underlying security at a stipulated price in the future. Also see: CALL OPTION, PUT OPTION. CALL OPTION, PUT OPTION.
OTC (over the counter): An off-exchange derivatives trade negotiated directly between buyer and seller that is not transparent to the outside world. The bank will typically make part of the bid-offer spread as a fee for the trade. Also see: An off-exchange derivatives trade negotiated directly between buyer and seller that is not transparent to the outside world. The bank will typically make part of the bid-offer spread as a fee for the trade. Also see: EXOTIC, STRUCTURED PRODUCT EXOTIC, STRUCTURED PRODUCT.
Partner: The most senior rank at the firm; this person typically makes in the millions of dollars per year. The most senior rank at the firm; this person typically makes in the millions of dollars per year.