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Goldman Should Stop Saying Clients Come First, Levitt Says

Goldman Should Stop Saying Clients Come First, Levitt Says
Arthur Levitt, former chairman of the U.S. Securities and Exchange Commission, in Washington. Photographer: Andrew Harrer/Bloomberg

Goldman Sachs Group Inc. should stop promoting itself as “putting customers first” because the slogan ignores conflicts inherent in trading, said Arthur Levitt, the former Securities and Exchange Commission chairman and a senior adviser to the firm.

“We probably ought to stop saying that because nobody really puts customers first,” Levitt, 81, said in an interview with Erik Schatzker on Bloomberg Television today. “Business is a tension between sellers and buyers.”

“Our clients’ interests always come first,” has been the No. 1 business policy at New York-based Goldman Sachs since the late 1970s, when then co-Chairman John C. Whitehead drafted a set of 14 business principles to guide the firm. Levitt’s suggestion comes 14 months after a committee on which he served issued a “business standards” report that reaffirmed Goldman Sachs’s commitment to putting clients’ interests first.

“Goldman shouldn’t play to that,” Levitt said in the interview today. “Goldman should play to their competence, which is considerable.”

Goldman Sachs, the fifth-biggest U.S. bank by assets, was criticized by former derivatives salesman Greg Smith in a March 14 opinion piece in the New York Times for failing to live up to its principle of putting clients first. Chief Executive Officer Lloyd C. Blankfein and President Gary D. Cohn responded that Smith’s assertions “do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of clients.”

Trading Revenue

Goldman Sachs made 60 percent of its revenue last year from sales and trading, outweighing businesses that advise clients on takeovers, financing and money management. Levitt said the company shouldn’t emphasize putting clients first because it doesn’t recognize the reality of the trading business.

“There is a logical, reasonable, fair, understandable tension between a seller of a product and a buyer of a product,” Levitt said. “That’s not to stay that buyers should beware. It is to say there should be transparency. But on the other hand, let’s not create a fellowship of buyers and sellers that will march into the sunset.”

Levitt is a member of the board of Bloomberg LP, the parent of Bloomberg News.

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