Justice for Goldman Sachs!?

There is an old editorial page cartoon caricature of a corporate big wig, fat, balding, ear to ear grin, big cigar in his mouth, dressed in a pin striped suit with huge bags of money overflowing around him that comes to mind when reading about some of the financial "goings on" involving Goldman Sachs.

In e-mail messages Goldman provided to "the Senate Permanent Subcommittee on Investigations"[1] (released on Saturday) indicate the company made "some serious money" betting against the housing markets" and "appear to contradict statements by Goldman that left the impression that the firm lost money on mortgage-related investments."[2] According to Senator Carl Levin, D. MI. the head of the Committee, "The 2009 Goldman Sachs annual report stated that the firm did not generate enormous net revenues by betting against residential related products"These E-mails show that, in fact Goldman made a lot of money by betting against the mortgage market."[3]

The messages show that in late 2007 Goldman was extolling its negative bets on mortgages but "by late 2008, Goldman was emphasizing its losses, rather than its profits, pointing regularly to write-downs of $1.7 billion on mortgage assets in 2008 and not disclosing the amount it made on its negative bets."[4]

Most significantly, in late 2006, (well before the 2008 financial meltdown and the bursting of the sub-prime mortgage bubble) "there are messages that show Goldman executives discussing ways to get rid of the firm's positive mortgage positions by selling them to clients,"[5] (seemingly an early instance of the firm taking advantage of unsuspecting clients by dumping these securities without informing these clients forthrightly about the risks they (the clients) would be taking by buying these securities.

Put simply, aren't you as the financial broker responsible for guiding your clients? Are they not looking to you to provide guidance in taking the proper course of action? These are the questions that keep ringing in this observer's ears. Isn't the financial broker (whom the client is putting his trust in) legally obligated to be working with and for his client and guiding them and providing them with the best possible information about what the client is considering buying as opposed to using him as a convenient foil to unload assets you believe are going to go bad?

This appears to be the crux of the SEC fraud suit brought against Goldman last week. And these e-mails (some of them at least) seem to confirm that fraud.

It is true; nobody is tried and found guilty by a newspaper account. That is left to a prosecutor with supposedly enough evidence in hand to formally charge, indict and bring one to trial. The same should be said and afforded even such a financial behemoth as Goldman Sachs.

But that said, when revelations of damning malfeasance come to light and are published and become part of the public record, for there to be a whitewash of the "evidence" and the company and its executives are not held to full account, the premise of the rule of law is thoroughly compromised. It confirms the populist belief that the rich get off for their indiscretions while the poor get sent to jail for theirs.

In the eyes of the people of any country, exacting justice is a positive sign of a legitimate benevolent government and supportive of its people while the lack of justice is a sign of a malevolent government that lacks legitimacy and is oppressive toward its people. The question begs; which are we?