The Case Against Goldman Sachs and Company

Subject: Finance
Pages: 2
Words: 564
Reading time:
2 min

Goldman Sachs is an international company located in the New York City of the United States. This firm engages in offering securities services, venture banking, managing investments as well as offering other fiscal services principally among institutional customers.

In the year 2007, the Securities and Exchange Commission sued Goldman Sachs and the firm’s employee Fabrice Tourre over securities fraud. In this case, the firm had produced deceptive ‘statements and omissions’ which were linked to a synthetic guaranteed debt obligations, prepared and sold to shareholders. It was stated in the lawsuit that Paulson went to Goldman Sachs and requested the venture bank to make mortgage-backed unions, which he could venture in. Based on this, Goldman Sachs is to blame since it allowed Paulson who was laying a bet against the mortgage market to venture; greatly authorizing on the mortgage securities to be included in an ‘investment portfolio’ so that his economic interests could be favored. By doing this, Tourre misled the other investors through telling them that the selection of securities was done by an independent third party.

In this case, the losses experienced by the investos and the overall Wall Street market were attributed to; by the manner in which the deal was planned and not as a result of general decline of the mortgage market. It can be argued that, many investors trusted Goldman Sachs and hence ventured a lot in it, hence its collapse had an impact on their investments. Based on this, Goldman is to blame for the losses the investors incurred as it went against the securities rules, and regulations of just dealing for making and sell the mortgage-linked debt mechanisms subsequently betting on the investors who bought them.

On the other hand it is of interest to note that, the companies choosing the securities deliberately assisted to chose particularly the most risked mortgage-linked securities that would be more probable to provide resulting to investors, incurring huge losses. Further the Goldman is to blame, since it ultimately used the C.D.O.’s to place oddly huge unhelpful bets that were not largely for hedging reasons; where by doing this they placed the company at odds with their own investor’s benefits.

In addition, Goldman sold the securities to the investors and then short them as they thought they were going to loose value; hence it is to blame. It can be argued that, the making and sale of synthetic C.D.O.’s deteriorated the fiscal blow efficiently increasing losses by offer more securities for betting bet against. It is of important to note that, Goldman Sachs created more securities knowing very well that the market was souring, which resulted to investors loosing huge amounts of money. It was well indicated that some of the securities created by the company were so susceptible that they soured within the first months of creation. In this case, the company is to blame since it knew that what they created was of no use to the clients.

However, the company defended itself by saying that the claims laid against it were ‘unfounded in the law and facts’. In this case, the company is not to blame as it gave a widespread revelation to the clients where the largest shareholder selected the portfolio.

In conclusion; the Securities and Exchange Commission had a point in suing Goldman Sachs, because the company misused the fiduciary trust placed upon it by the customers.