Cashzilla

Goldman Sachs wings turned to ashes by SEC

Posted on 19. Apr, 2010 by Cashzilla in Uncategorized, banking

Oh, how the mighty banks have fallen.

Since Goldman Sachs started around 80 years, the phrase ‘Long-term greedy’ which was used by Sidney Weinberg, who was managing partner during the 1930s through to the 1960s, has been a sort of guiding mantra.  This ‘Long-term greedy’ attitude helped the company grow from being a simple unknown brokerage to become the world’s most profitable and powerful financial institution.

While most people would not describe being greedy as a virtuous trait, according to a highly controversial comment last year by Goldman Sachs’ current chairman and chief executive, Lloyd Blankfein, he believed the bank was doing ‘God’s work’.

The recent announcement by the America’s Securities and Exchange Commission (SEC) that the bank and one of its vice presidents, Fabrice Tourre, was being charged in relation to claims that investors were mislead over its collateralised debt obligations, a complex financial product sold by the bank during the boom years of the Noughties, must have been seen by him as some form of blaphemy.

According to the Motley Fool, “The watchdog alleges that the bank mis-stated and omitted key facts about the CDO, and failed to reveal that a major hedge fund had a hand in selecting the underlying portfolio of securities– even though Paulson & Co. had bet its value would fall by shorting the CDO.”

With the mantra, “No one ever got fired for hiring Goldman Sachs”  still persisting to ring true for many in the financial markets, it seems that the current claims and various other allegations over the past few years may have partly tarnished the wings of gods financial messenger, or as Rolling Stone magazine once described it, a “vampire squid wrapped around the face of humanity relentlessly jamming its blood funnel into anything that smells like money”.

The news of the SEC charging the bank with civil fraud has meant that the most profitable investment bank in the world saw its shares plunge by 12.5% to $160 over the weekend, taking off a whopping $12 billion from the market cap of the firm.

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Tags: Collateralized debt obligation, featured, Goldman Sachs, Hedge fund, Lloyd Blankfein, Motley Fool, Rolling Stone, Sidney Weinberg, US Securities and Exchange Commission