Swot Analysis Goldman Sachs

796 Words4 Pages
Goldman Sachs was once referred to as the “white knight”, the ultimate corporate- go- to- guy. Emerging as the most influential bank, it had survived the financial crisis, the same in which Lehman Brothers, Fannie Mae and Freddie Mac were heavily scrutinised. In 2010, this restructured to the proposition that Goldman Sachs’ numero Uno client is Goldman itself –It came under the radar of a “shrewd winner”.
Goldman Sachs introduced ABACUS 2007-AC1, a collateral debt obligation (CDO), for investors who anticipated that the subprime mortgage and residential markets would further boom. There were twenty five such Abacus deals and several other CDO’s without the Abacus label. Unfortunately, within a span of 9 months the investors lost 1 billion with
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It bundled up home loans from states like California, Florida, Nevada and Arizona,etc which became some of the worst victims of the US housing crash, consistent with his prediction.They expected 123 hedge funds to decline in the future. On the other hand, Goldman Sachs was unethically profiting at the expense of the same clients it was trying to lure in million dollar mortgages which they knew would fail.
In its defence, it claimed that if the investors had not liked the underlying securities they could have turned away from making the investment and that it was home owners fault that they took loans they could not afford. It was confident that it had done nothing illegal; neither was it trying to take advantage of the decline in housing market.
However Goldman Sachs had been terribly wrong .Honesty is expected by any person or institution. Similarly Goldman is obliged to be honest to its customer, which it failed to do. It was influential in the investor’s decisions to buy the loans, by misstating key facts attached to the subprime mortgages and material data as the United States housing market was beginning to falter. They devoid their customers of transparency which is both ethically and pragmatically required in any
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On April 27th, 2010 SEC filed a civil suit against it with a fine of $550 million. The following midmorning there was a fall of 13% in its shares along with a wipe-out of $12 billion of shareholder value. Goldman very well deserves this for its unethical behaviour.
The CDOs that landed Goldman Sachs in hot water had reaped them revenue of $13.39 billion. The fee of $ 550 million was as meagre as letting go of a two week profit for them. Even though it was the largest ever fee collected from the Wall Street, for Goldman Sachs it was just a soft pinch. The U.S. Treasury was to get $300 million and the remaining to those who had suffered due to the Abacus deal.
There is a need for financial regulations which expose the derivative markets. The taxpayers need to be safeguarded against having to fund potential bail outs of banks and there needs to be transparency in the dealings of financial intermediaries. Goldman was still leniently dealt with. There were no much restriction on future fraudulent behaviour and no prison time for them, which they should have had. It would pose a good example for other profit hungry giants, of the consequences of misconduct and fraud. The monetary fine and harm done to Goldman’s reputation is appropriate for its treacherous act of moral
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