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JPMorgan CEO warns staff on schadenfreude after Goldman firestorm

JPMorgan CEO Jamie Dimon.

© Robert Galbraith / Reuters/REUTERS

JPMorgan CEO Jamie Dimon warned employees not to seek advantage from competitors' "alleged issues" after a former Goldman Sachs banker sparked a firestorm by charging that Goldman managing directors viewed clients as "muppets."

Mr. Dimon's memo, awaiting Asia employees in their e-mail inboxes on Thursday morning and a copy of which was seen by Reuters, also implored staff to focus on their own bank's standards amid the furor stirred after ex-Goldman banker Greg Smith published a scorn-filled resignation letter.

"Today's New York Times op-ed by a Goldman Sachs executive is generating a lot of discussion around the street," Mr. Dimon said.

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"I want to be clear that I don't want anyone here to seek advantage from a competitor's alleged issues or hearsay -- ever. It's not the way we do business."

The Dimon message was sent to the bank's global operating committee and later forwarded to wider parts of JPMorgan, sources who have seen the memo said.

JPMorgan declined to comment on the memo.

Goldman faced an unprecedented assault from one of its own on Wednesday when the London-based Mr. Smith published his resignation letter in the opinion section of the New York Times, calling the Wall Street bank a "toxic and destructive" place.

"It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as 'muppets,'" said the letter by Smith, who worked in equity derivatives.

Goldman said in its official response on Wednesday that the bank disagreed with the views expressed, "which we don't think reflect the way we run our business."

Sources at banks including Citi, Credit Suisse and Nomura said they were not aware of any memo similar to Mr. Dimon's circulating at their respective firms.

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The kerfuffle that followed Mr. Smith's letter, however, has sparked worries at rival institutions over disgruntled bankers in their ranks and, according to a banker at a leading U.S. bank, consideration of improvements to internal systems that can address grievances before malcontents go public.

While Goldman Sachs is attempting to play down the Mr. Smith letter, the firm's shares fell 3.4 per cent in trading in New York on Wednesday and its impact has become a topic of discussion among its employees.

"It's definitely got people talking in the office," said an Asia-based trader inside Goldman Sachs who did not want to be named.

"It's amusing honestly because perceptions depend on the individual. For every one person who has something malicious to say about the company, you'll find 10 others who have a 180 view on that," the trader said.

Several former Goldman Sachs employees who worked at the company before its initial public offering said the firm's culture did change after the IPO, as Mr. Smith alleges, with bankers increasingly under the gun to boost profit.

"The culture definitely has changed since I was there," said property developer SOHO China CEO Zhang Xin, who worked at Goldman Sachs some 20 years ago and now is a client of the firm.

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"Since the company went public there's this pressure on earnings."

One former banker, who worked in derivatives sales at the time of his post-IPO departure from the firm, said however that Mr. Smith's singling out of senior management struck him as unfair.

"When Goldman Sachs was preparing for the IPO we all knew the culture would change, so to single out Lloyd (Blankfein) and Gary (Cohn) and say they wrecked the firm is a bit ridiculous," said the banker.

Two Goldman Sachs clients who work at different hedge funds both said the criticisms that Mr. Smith levels at the U.S. investment bank's corporate culture could equally apply to its rivals.

"I don't think that the article is a shock at all. It's probably true at most places, not just Goldman. If you work in a bank, if you don't produce you are gone. That's the culture pretty much everywhere," said one of the hedge fund managers.

Added the other: "From a trading perspective, the coverage is good, the execution is good, and that's what matters to us. We go into a relationship with eyes wide open."

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