Goldman doesn’t need to be guilty, just smelly
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If Goldman’s business starts suffering from the stain of the SEC’s lawsuit after a stellar quarter of earnings, the investment bank’s role in the rehabilitation of the financial sector could look more like a quadruple bypass at the heart of the matter.
Goldman’s stunningly hot earnings are nothing new. The company routinely throttles forecasts. So it almost didn’t matter how much money they earned. Think about that for a second. The nation’s most celebrated money maker getting no love from investors for making more money than it was expecting. What else is it supposed to do? Or, more importantly, are investors finally beginning to begrudge Goldman Sachs its success? If clients start to become fearful about doing business with the bank because of the lawsuit, its earnings-generating power will take a hit.
In fact, the smell test in this case could ultimately prove to be more important than the legal one. If the perception of unethical behavior at Goldman helps the Obama administration pass more stringent financial reform, then the SEC’s action will have been a bigger boon than any fine or penalty the bank might be made to pay down the long legal road ahead.
That may turn out to be of bigger value to a reformist government than a Goldman guilty plea. And if it turns out Goldman is not guilty, then the SEC will take it on the chin again, and the market is almost as familiar with that result as it is with another blowout quarter from Goldman Sachs.
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The executive leadership teams at our nation’s largest banks and financial insitutions are responsible for everything that happens or fails to happen within their domains. If firms such as Goldman Sachs cannot ethically manage their affairs in detail (including the actions of their non-principal employees), then we should dissolve Goldman as “too big to manage.” The nation is exhausted from the excesses on Wall Street, and if the leadership at Goldman Sachs cannot fulfill their duties and responsibilities, then let’s proceed now with breaking them up for the good of the banking industry, as well as the nation. Again, the senior mangement teams at our nation’s banks and insurance companies are responsible for everything that happens or fails to happen within their domains, and quibbling about that responsibility is outrageous. More at:
http://wjmc.blogspot.com/2010/04/banking -and-financial-services-are-in.html
Thank you for the opportunity to comment…
I see a risk to GS business coming from the growing political appetite in the US for more disclosure, control over financial derivatives, appetite for bigger penalties in cases of volations of existing securities laws or regulations. That’s my current impression.
Achilles