Goldman-Sachs is Learning that Expectations Influence Reputation

Goldman-Sachs is now defending its reputation against accusations that it mislead clients about the risk in some of its derivative programs. First, they argued that the investors--other companies--were sophisticated and should have understood the risks. Second, they argued that they would never knowingly defraud a client. Finally, they argued that it was perhaps and individual who might have been involved, although they are now claiming that the individual was not the final decision-maker in the offering.

Goldman may or may not have done anything wrong in its opinion, but the perceptions of regulators and the public are quite different. Expectations have now been reinforced that Wall Street cared only for itself and its own sense of right and wrong. In fact, an editorial cartoon in the Philadelphia Inquirer of April 21 showed a ship entitled Wall Street bombarding a coast line entitled Main Street with canon shells, destroying the city. That is the view that most people have today. That a bunch of people with over-the-top salaries did whatever they wanted to do to fatten those salaries even more.

What is lost on all of this is what is not being denied. Goldman made its money, whether or not they duped anyone or did anything illegal, by coming up with a plan to short the housing market. In other words, to bet that housing would collapse. They made billions on the misfortune of those who lost their housing values. This was also a company that made money by floating some of the money to inflate the housing market. Sounds like Catch 22. They could not loose. Sell the airplanes and then sell the anti-aircraft guns. We all thought this was a novel. We are now learning that this was standard operating procedure for Wall Street. This is an industry with no soul and no real conscience. It cares only for money and nothing else. Let the public judge them for what they really are.