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Why Greg Smith is leaving Goldman now

March 14, 2012: 5:07 PM ET

Goldman SachsGoldman Sachs has changed and not only in the way an ex-employee says it has.

FORTUNE -- The biggest question I have when it comes to the now famous New York Times Greg Smith Op-ed where he accuses Goldman Sachs (GS) of doing what everyone else has been saying about the firm for years is "Why now?" (Besides, of course, the fact that he probably recently cashed his bonus check.)

Well before Goldman was called a vampire squid, it's been long understood that Goldman would "rip the eyeballs" out of its clients in order to make a buck. And if you had any doubts, nearly two years ago the Securities and Exchange Commission's case against Goldman based on the mortgage bond Abacus made it clear that the firm will sacrifice some clients in order to make money for others and Goldman itself. When Goldman traders call something a sh**y deal, the people they are going to get to step in it don't work at GS HQ.

So the question is what has finally gotten Greg Smith fed up enough to blaze the firm and most likely his Wall Street career today? That's the question I posed to Wall Streeters today when I called to ask about Smith 's public "outing" of Goldman. Most of the people I called said they had read the op-ed. Everyone said it was the thing people were talking about. No one was surprised I was calling. And to be fair a number of the people didn't agree with Smith. Hedge fund manager Whitney Tilson said he is a client of Goldman and has been "universally pleased" with his experience. Another person I talked to with knowledge of Goldman's recent year-long internal investigation said it produced no evidence that firm's employees routinely put Goldman's interests ahead of its clients.

Still, the best answer I got was that things have indeed changed at Goldman but not in the way Smith explains. For the past few years the firm has been filling more and more of its positions with people who started their careers elsewhere. The most prominent example of this is David Solomon, who started his career at Bear Stearns and has risen to be the co-head of investment banking at Goldman, and a rumored contender for CEO Lloyd Blankfein's job. A decade ago when Smith started, a position like that would have gone to a Goldman lifer, a person like Smith, who had started at Goldman as an intern and worked his way up.

MORE: Blankfein out as Goldman Sachs CEO by summer?

In the wake of the financial crisis, there had reportedly been a culture clash going on at Goldman between traders and investment bankers. The I-bankers have been angling for one their own to replace Blankfein. So far it appears that Blankfein and his lieutenants, who mostly come from the world of traders, have been winning. But there is actually a second culture clash going on. And that is between the people who have been at Goldman their entire careers and expected to be at the firm their entire careers, and the people who have more recently showed up. In the past that may not have mattered. There was a lot of opportunity at Goldman and a lot of profits to go around. But there are less profits in investment banking these days. And Dodd-Frank and its crackdown on proprietary trading means that much of what Goldman used to do to make money is going away.

That's not to say that Goldman doesn't treat its clients like "muppets," jamming their mouth's open, force feeding them the firm's worst deals and getting them to hand over commissions for doing so. And do that more than it used to. I can't say. But what has changed is that Goldman is no longer a firm that has room for as many Greg Smiths as it once did.

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About This Author
Stephen Gandel
Stephen Gandel

Stephen Gandel has covered Wall Street and investing for over 15 years. He joins Fortune from sister publication TIME, where he was a senior business writer and lead blogger for The Curious Capitalist. He has also held positions at Money and Crain's New York Business. Stephen is a four-time winner of the Henry R. Luce Award. His work has also been recognized by the National Association of Real Estate Editors, the New York State Society of CPA and the Association of Area Business Publications. He is a graduate of Washington University, and lives in Brooklyn with his wife and two children.

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