Quest Means Business   « Back to Blog Main
April 27, 2010
Posted: 1512 GMT

Top representatives from Goldman Sachs maintained that the company did not engage in any questionable business deals leading up to the financial crisis.

Was Goldman Sachs at fault?

Was Goldman Sachs at fault?

A group of seven current and former executives at the New York City-based company are set to appear before the Permanent Subcommittee on Investigations later Tuesday to testify about the role of investment banks in the crisis.

Other top Goldman executives also blasted charges made by lawmakers in recent days that the company bet aggressively against the U.S. mortgage market as well as its clients, making as much as $3.7 billion in the process.

The charges stem from a slew of company e-mails and documents that have been released in recent days by Senate committee.

Goldman has refuted such claims, maintaining that it merely bet against housing in an effort to hedge its exposure to the housing market, which was quickly unraveling at the time. All told, the New York City-based investment bank said it lost $1.2 billion on residential mortgage-backed securities in 2007 and 2008.

We want to know what you think.

Should Goldman Sachs be held accountable for the way executives conducted business? Are they justified in the reasoning that it is all part of running a business and it's about the bottom line?

Posted by:
Filed under: Business •Quest Means Business

Share this on:
dotmafia   April 27th, 2010 3:45 pm ET

financial terrorists - send them to gitmo! this is your wonderful capitalism at work america.

Theresa   April 27th, 2010 3:54 pm ET

Yes to the first question. No to the second.

Gollum   April 27th, 2010 4:01 pm ET

Capitalism without a proper regulatory system is a recipe for executives and huge corporations to 'gamble' with people's hard earned money! Even a 5 yr old could figure that out! All you need to do is have an 'independent' body looking after people's investments and making sure that 'good risks' and not crazy ones are made with people's hard earned money. it was all part of doing business for these people. They did it already, they just got caught this time.

Julian   April 27th, 2010 4:05 pm ET

We'll soon find out if GS is criminally responsible but also all corporations share moral, social and environmental responsibilities. They are unquestionally morally bankrupt and the CEO and Board should be forced to resign.

Brandon   April 27th, 2010 4:20 pm ET

I am very disappointed to read the posts here and realize just how little people understand about financial markets and practice. There is a possibility of wrongdoing here, but it is important to realize that what happened is also consistent with hedging/leveraging, a common, ethical, and wise practice in finance. That voters are willing to take such a strong stand in ignorance makes me feel ill. If there is clear evidence of wrongdoing, then by all means let them be accountable. If only government lawyers were held accountable if it turns out to be only a populist witchhunt.

henry laycock   April 27th, 2010 4:51 pm ET

Of course they are not justified in the reasoning that it is all part of running a business and it's about the bottom line. If the bottom line means cheating your customers – as it appears to in this case – then the bottom line means going to jail. At least it OUGHT to mean jail. But with all the money these folks have made, they can afford lawyers who may be able to hold off any penalties for years, and possibly for ever.

Michael   April 27th, 2010 4:54 pm ET

agree with Theresa and Gollum
Yes to the first question. No to the second
Capitalism without a proper regulatory system is a recipe for executives and huge corporations to 'gamble' with people's hard earned money!
Capitalism without a proper regulatory system is like slavery

Syed   April 27th, 2010 4:55 pm ET

This is ridiculous.. Its just frustrated and uninformed senators making uneducated accusations against someone who is more cerebral than them . Maybe the whole world should get against our country since it is doing better than all the other countries in the world. Especially Ms Mcaskill made herself look extremely dumb and idiotic. She should be ashamed of herself. And Goldman is ding its job and we cannot get agaisnt someone just becasue they are doing better than us.Thats just wrong. And people like dumb mcaskill are a shame for the senate since they are soo dumb and uneducated.. She should be ashamed of herself..Its soo dumb.. she has no knowledge about the financial world and is making a fool out of herself.. Shame on her..

meru   April 27th, 2010 4:58 pm ET

Someone has to be kidding me. We as Americans are not who just get against someone because they are doing better than us. Especially because someone is better than most.. Maybe the whole world should get against USA..since they are the super power and other countries like russia etc.. have disintegrated.

meru   April 27th, 2010 5:02 pm ET

This is the height of human jealousy at work. This is ridiculous. People have to be more informed about how the markets work and there should be more disclosure pilicies on the whole. Its not the fault of Goldman.. If America wants they have to have more transparency then it should be from the SCC some set of rules.. This is ridiculous.. They are asking questions from Goldman which are preposterous and hollow..

MaryEllen   April 27th, 2010 5:05 pm ET

GS plays fast and shrewd. The tricky part is findng honest individuals
who have the smarts to stay ahead of their schemes and shut them down at the starting gate. There is no loop too small for GS.
Thats why they're considered the best of the corporate terrorists

SMU Cox Web   April 27th, 2010 5:07 pm ET

Anyone familiar with the financial market knows that they cover their exposure in much the same way bookies do. If you have X # of bets that the Cubs will win a given game, you must take Y # of bets that the Dodgers will win.

That's where the real shame lies – no matter what the market does, the institutional investors make money. They have the funds and knowledge to play both sides of the game. Either way, they come out ahead. It's the little guys with the pension plan that looses out. With the Baby Boomers approaching retirement, having private funding to supplement Social Security is *critical*.

Oddly enough, it's not so much the institutional investors that determine profitability but how the trades are made. Check out some new research from one of our professors –

meru   April 27th, 2010 5:13 pm ET

I totally agree with Brandon. Very very few people know about finacial markets as most of us do not even have the money or the knowledge to invest in them. Hence ignorance does not give us the right to make uneducated remarks or hurl ignorant accusations at an industry. We cannot blame something that is doing better than us just becasue we have gone down. I think this kind of thinking is what is unethical. If Goldman Sachs is unethical then every other bank/principal is unethical. Please everyone first go and get some knowledge about financial markets and then make any remarks. Do not be lead by ignorance and frustration alone. Make some educated remarks. Its not Goldman's duty to make rules about disclosures enveloping the whole financial world. Its their job to make money and thats what they are rightly doing.. nd why would we want all America's financial institutions to go down. Why? They still belong to America even if they're doing well.And especially when they have done everything right and as an American we are not going to go against them just because they did well.Period..

Candice   April 27th, 2010 5:15 pm ET

Agree with Meru and Brandon. Most of us don't know about Financial Markets. They have done nothing wrong..They did their job the best way they could. and lets be proud for it for once. They are still american.

mason   April 27th, 2010 5:38 pm ET

A word about bonuses.Some people at Goldman and other companies work like crazy getting divorced, separated and working 24 hours.. Thats the reason the best ones hire the best and the most hard working..Now when I worked at Fanny I would leave at 4:30 . I know some people who work at wall street ..they work beyong everyone deserves a reward for working hard and killing their brains.. We should not only look at the big bosses..there are other people who are very low down the line and work really hard..

george   April 27th, 2010 5:42 pm ET

they are coming up with the most preposterous of stuff accussing Goldman for every crisis. Next they would accuse Goldman for the volanoe eruption in Iceland and any other earthquakes to follow. Someone should ask the Senators what they would do to save their money and to make profit. Ofcourse they would do they are doing now.. They are blaming Goldman for being uninformed and uneducated about the market...

Adam   April 27th, 2010 5:43 pm ET

This is 100% political and a complete sham! The “process” makes the American system look cheap and sensationalist. Goldmans is being pursued by vote hungry politicians when the simple fact of the matter is that Goldmans is the very best at what it does and it's being pulled through the mud because of that well earned and well deserved position – it's the greatest firm in Wall Street history! Goldmans did nothing wrong and it will be vindicated for this. People will always be jealous and envious of the best.
Moreover, the easiest path is always to find someone to blame for things that go wrong – the real culprits for the economic crisis are YOU, ME, and the average Joe/Jane on "main street" that went out and spent money we didn't have!
Stop making a mockery of the system, applaud Goldmans for being the best and taking this undeserved scrutiny with such grace.
Yes changes need to be made to the system, banks need to own their mortgage books, take responsibility for bad lending practises, and better manage their risk. But blaming Goldmans is just ridiculous.
If there is a god, he/she certainly blessed Goldman Sachs. Hopefully now that same god can move to bless America and put an end to this charade

Omar   April 27th, 2010 6:00 pm ET

Maybe some people from Goldman Sachs should become Senators and maybe our country would not suffer as much. Because sincerely and honestly enough its a shame how most of the people asking questions right now don't even know how financial markets work and its a shame for America that those who are ruling it are so uneducated and uninformed about subjects that they have chosen to be investigators upon. They cannot blame someone for something they have no knowledge about. Maybe they should become like the people who work for Goldman and use their 'brains' for once. We as Americans need to control our expenses and not buy stuff we cannot afford. Something should be done about that. I am proud of Goldman because it is the smartest firm in the world and is American. Its just that if the tables were turned and the senators were being questioned for why being so uninformed and letting America face an economic crisis.They need someone to blame for not being able to do anything about the economic crisis and hence they chose Goldman. Goldman should run the Senate.It loks foolish how EXTREMELY UNEDUCATED AND UNINFORMED' these people are about financial markets.

Sasha   April 27th, 2010 6:22 pm ET

GS is as much guilty as greedy investors, including home buyers. There were many greedy parties involved in the last excess. The one to also blame are regulators who should see it happening. They failed. And let us ask where have been politicians who have power over regulators. What was their role in it? Tragedy is that if one listens to today's hearing, or better said inquisition, it is absolutely clear that the members of the committee have almost no clue what was going on. And they will never have. Dear committee members, it you tells us GS failed (morally or criminally) you also say also failed big time as a watchdog. How can we be sure you are right this time? If I understand correctly you mostly blame Goldman for not saying this or not disclosing that. Fine. How many thing you forget to disclose to voters (some tips: girlfriends, gifts, etc.)? I just want to say that if politician regularly prove lacking competence and being morally corrupted, they are not the ones who could say what is right and what is wrong.

steve   April 27th, 2010 6:27 pm ET

The evidence shown by the Senate is very subjective. Goldman does have a right to hedge against risky bets (which all financial institutions do). Understanding financial derivatives is very esoteric and many people should first understand the financial markets before making an grandiose accusation. However, the question at heart is whether Goldman knowingly misled clients and were the rating agencies deliberately giving MBS incorrect ratings. If it is true then there is a real problem.

Michael   April 27th, 2010 6:31 pm ET

A few years ago I said to my buddy; "Dude, I bet you a dollar this real-estate boom can not last and will bust soon!". I won the bet and made my dollar, should I go to jail?
This year I am betting the Redskins won't make it to the Super Bowl, does that make me a bad guy?

GOHAR BILAL   April 27th, 2010 6:59 pm ET

i disagree with Mr. Kevins comments that we should put in place a process that would allow MTM of CDOs or sub prime securitized products. Investors will still loose out.

What about those transactions that have downgraded within days from investment grade to junk / non investment grade. By the time, the information is processed and reflected in the MTM of that particular deal, its too late. Other deals with similar assets perhaps yes

If we structure a securitization deal from a pile of garbage where the reinforcement underneath that garbage is still made up of grabage it is still grabage.... declaring that the higher pile is investment grade or better is a mis-representation and most structuring professionals know that. So it does come down to morals and ethics which incidentally the financial markets do not promote

gohar bilal

Ishmael   April 27th, 2010 7:29 pm ET

I so agree with Sasha and Michael. I mean they just chose the most successful firm for their own political benefit and started wanting them to 'disclose this and disclose that' which they are not at all obligated to by any means. Every business big or small has their own little secret to do well. Even a bakery has a 'secret ingredient' they won't tell their customers about even if it is an 'extract obtained from cow dung'. Why can't the senators first actually get the knowledge and make proper rules regarding these markets. And better why don't they disclose all their personal emails, girlfriends, past relatioships, red tapism and gifts etc.. Who are they to just goafter something when they are not clear about it themselves and are not angels or god anyway with a completely free 'non profit driven conscience'.If they were the ones who had made money all would be good. It is Goldamn's right to make and maximise profits. 'THATS THEIR JOB'. The senators' jobs are to get educated and do things themselves which are free of guilt or moral liability.First they should check themselves and the 'vote greed' and the 'public sympathy' greed that drives their motives.Their objectivity is an issue to since they get votes and positions from the public..Ridiculous!!

Bombay   April 27th, 2010 7:39 pm ET

1. "Very very few people know about financial markets as most of us do not even have the money or the knowledge to invest in them"
--> Goldman DUPED its investors. Knowledge of the financial markets is irrelevant. Most of its investors were sophisticated.

2. "The real culprits for the economic crisis are YOU, ME, and the average Joe/Jane on "main street" that went out and spent money we didn't have!"
--> Mortgages were aggressively sold to people even though their incomes didn't qualify them for a mortgage.

3. "The one to also blame are regulators who should see it happening. They failed. And let us ask where have been politicians who have power over regulators."
-–> TOTALLY agree.

GAMBLING Sachs + lack of regulation + Wall-street lobbyists + no productive allocation or efficient use of capital + MBA students with big-bonus aspirations + GREED = FINANCIAL CASINO!! A few benefited, most lost!! A lot of people that weren't involved in this THIEVERY have lost their savings, retirement funds, homes, etc.

Regulate GAMBLING Sachs and other such firm and make sure that their GREED does not negatively impact others unrelated to their gambling.

shorty   April 27th, 2010 8:26 pm ET

Guys, these people are way smarter thane any senate member and 99% of all of their clients and virtually all of their peers in the industry, how could they ever lose or be overcome.

They have never touched ground, rode in a public bus and their children will never even talk to lower class people other than servants.

Lee   April 27th, 2010 8:33 pm ET

Yes to the first question and no to the second. Goldman sachs manipulated the market, by selling "shit" to their customers/competition and afterwards going "short" on the competition.

It's like you are selling a broken machine to a farmer, and behind his back you are betting that he will harvest less groceries this year, because you knew beforehand that you sold him that broken machine.

The exact same thing happened here. Furthermore they were misleading their customers, by not notifying their "short betting".

George   April 27th, 2010 9:05 pm ET

Well, I do know about the financial markets, as I had been there before, I know just exactly how they play the game. And NO ONE deserves the king of $$$ these executive get, especially when the run a company into the ground and cheat their clients! The government, ie the taxpayers should have let these companies and executive go belly up. Then where would they be???? I rest my case!!!!!! say what you will!!!

Brent   April 27th, 2010 10:11 pm ET

At the end of the day nothing will change, the politicians will end up looking as stupid and incompetent as ever and completely lacking control of the financial system and the boys at Goldman Sachs will look like the shiftless, greedy, morally and ethically bankrupt capitalists they are. God bless America and our wonderful free enterprise capitalist system! Ain't it just great?

Comments have been closed for this article

Powered by VIP