Investment banks are like football clubs. At some point they fall. Always. This often occurs at, or shortly after, the point at which they seem most invincible. A fail-safe investment bank does not exist. Just one that has not failed yet.
Goldman Sachs has had a terrific run (for itself, anyway, clients are perhaps less certain). Is that run now over? It could be. The reason the letter from Greg Smith to The New York Times is so devastating is that it speaks to every critical rumour that has done the rounds about Goldman Sachs since at least 2006: it bets against clients as a matter of routine; it has zero compunction about making a dirty dollar today – tomorrow can look after itself; the top bankers are arrogant, insular and unruly.
Even if this is a bit unfair, the perception grows. Five years ago, if you asked the chief executive of a FTSE 100 company why he hired Goldman, the answer might be: because they are the best. Two years ago, it was: because I've always used them, they know so much about us I don't want them working for the opposition. Now it might be: I don't know. We should hire someone else.
If one big client goes, another follows. Like advertisers at The News of the World as the phone-hacking scandal broke. Goldman's franchise is severely damaged. It is hard to see how it can recover its reputation without a major overhaul. It has been fined by regulators, sued by clients and become a byword for greed in the financial sector. Some staff may go to jail. One myth is that everyone who works there is some sort of erudite, smooth, intellectual genius.
I kicked around for a little while with three Goldman guys in New York years ago. They were great company (in short doses). And utterly full of themselves. And usually smashed after 9pm. By their accounts, they excelled at their jobs for "the firm".
Even assuming they were brilliant, they were brilliant in one direction only. Their cleverness at trading extended into no other fields.
The boss in London, Michael Sherwood, is an extremely sharp man. He's also on the brusque side of direct, shall we say. He's always understood the press (and everyone else) will do as he says, for the simple reason that he's from Goldman.
The entire firm is so used to (nearly) everyone being desperate to be its friend, it may struggle to cope with what may be a new reality. David Cameron is suddenly wishing he hadn't been pally with Rebekah Brooks. Goldman clients are going through a similar thought process.
Don't expect a Lehman Brothers style implosion, but Goldman is in the fight of its life. It must change fast and clients need to believe it has done so.
Otherwise relegation awaits. Goldman Sachs. News International. Manchester United. The football club is currently top of the league. Goldman is still in the top four.
But empires fall. Always.