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Goldman's Greed Analysis

847 Words4 Pages

Goldman’s greed…
By GOVIND MITTAL.

Greed in today's world has taken over every sphere of life and the investment banking scene isn't any different. The ever raising appetite for trading and speculation has intensified and multiplied this factor exponentially. Everywhere interest are diverging and converging but all of these conflicts are not just a matter of legality or even just ethics but rather a matter of moral obligation and responsibility of a firm towards it's clients. Investment banks today rather than focusing solely on clients interests , as a instrument for their investment needs are profit hungry trading houses wrought with conflicts.
This essays purpose is to show you how large investment banks like Goldman Sacs betrayed their …show more content…

charged Goldman, Sachs & Co. Along with one of its Vice Presidents Fabrice Tourre of misleading it's clients by misstating and not disclosing some important facts regarding some of the securities it created for non prime or subprime lending mortgages as the housing bubble in U.S burst. And what's more it did that not just once but twice but all of this only came into notice after the housing bubble burst.
What Goldman basically did was they made synthetic CDOs which spread like toxic wildfire throughout the financial system and eventually brought the whole economy crashing down. These CDOs structured with conflicts of interest inherent in their designs which allowed the big investment banks to bet against their own clients as they held short positions while the clients themselves lost a huge amount of money…
How the abacus deal worked was like this:
First , Goldman Sachs was told by hedge fund manager that he wanted to invest or rather go against the subprime mortgages by using the Over the counter financial derivatives such as CDOs. These securities were to shorted by the hedge fund manager.
Second , the IKB was willing to insure them against or buy out the risk that Paulson was willing to short. But they fearing legal ramifications would only do so if they were selected by an outsider.
Third , Goldman approaches ACA Management LLC in order to manage the …show more content…

Goldman also led ACA to believe that Paulson had a 200 million dollar stake in the portfolio which was false.
Goldman made 15 million in fees.
Most of the investors lost their money. Money earned by Paulson by entering into a credit default swap with Goldman which means that Paulson would pay Goldman a certain amount but if the securities defaulted the firm would pay to him what he stood to earn and the principal. ( Which they knew was going to happen ).
This incidence including their internal memos of communication describing the deal as “shitty “ and “ crap” and also the elaborate precautions it took all exhibit that Clear conflicts of interests existed and the firm chose to ignore them while legally it might be difficult to prove but it's clear how Goldman hid vital facts for it's own profits. They were too clever not to notice these conflicts.
And this was not the only time it did this. A year before ABACUS Goldman created some RMBS or residential mortgage backed securities . Goldman again took a short position and claimed the

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