Cutting like this creates an environment of paranoia and completely destroys morale. Though perhaps employees at Goldman Sachs understand and accept this as their terms of employment. Definitely something to bear in mind if considering a job there.
This is the banking industry as a whole. Unless you have events like 2008, major banks just trade employees. None of them really care all that much about being fired. It's more of an inconvenience.
If you're new, you act like you're fresh out of college, slap GS on your resume, and hit up a bunch of banks. Someone will need you if you're good, and you won't get any more lowballed than you were for being junior anyway. You're in it to move up the ranks at this point regardless.
Honestly, it plays out a bit like the Valley. If some regulation or move by Google crushes a startup, the people leaving it aren't particularly stigmatized, and there's too much competition to weaken their negotiating position much.
Definitely, but it tends to be less significant if your move isn't finance -> finance. Having GS on your resume for several years will get you in any door. People have a distaste for finance due to recent events, but it's a pretty huge industry with highly transferable skills. A shrink in the finance sector is rarely a shrink of available jobs to employees in that sector. Employers in other sectors tend to acknowledge how demanding an industry it is. For example, I worked as a discretionary equities trader for half a decade. As more and more algorithmic trading encroached on my territory, I moved to software development. I was hired for back end development at a point in which the extent of my programming skills was data munging in R. 4 years later, I still struggle to adjust to a work atmosphere that continually tells me to chill out and go home. Sure, I took a pay cut. But it's not even close to the % reduction in hours worked.
Data gathered from acquaintances who have worked at GS suggest that, unless you fit a certain "mold"... paranoia and various forms of psychic collateral damage basically come with the air you breathe, in that shop. So the atmosphere of suspicion you describe is already part of your "environment".