Summary Of Goldman Sachs: Power And Peril

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Goldman Sachs: Power and Peril I am strongly agree with the action of SEC. The main problem of any financial and banking firm is Asymmetric Information (Adverse Selection and Moral Hazard). Adverse Selection is the risk before the money transaction while Moral Hazard is risk after money transaction. But before going directly into subject, we will understand the element involve in the case. The main role of SEC is to ensure that the stock markets operate in such a direction that it will create fair atmosphere for all investors. Goldman Sachs is the global investment banking, securities and investment management firm. Past event- The reasons of great depression, financial crisis 2007 were liquidity shortfall in U.S. banking system and the…show more content…
So that they selected high risky subprime mortgages. And the Vice President of desk, Fabrice Tourre mismanaged the whole condition as he gave wrong information to ACA. He had given the information to ACA that Paulson is interested in Collateral Selection process but in real the interest was different. These whole things misled the process. Further GS didn’t announce the participation of Paulson. It was a game made by Paulson. But he used the ground of Goldman Sachs. And so that Goldman Sachs had to know about the game of Paulson. But unfortunately Goldman Sachs failed to find the role of Paulson. So the fine was the necessity. Otherwise other financial institutes will also do same things. And it will lead to the new crisis. It is responsibility of each and every financial institution to do a duty in interest of its client. But had the Goldman Sachs done the duty properly? Unfortunately answer is no. Here Goldman Sachs acted as seller and buyer (Paulson- Seller and IKB- Buyer). As Goldman Sachs acted as both, they should have to know better. And if any financial institute served as both, seller and buyer, there is always a conflict of interest. If there is high profit from one side then that institute always made partiality. And this is not right thing. And last thing is truth and transparency. Goldman Sachs assumed that IBK is the banking institute and they have all knowledge about the market risk and it was sophisticated investor. So Goldman Sachs said that they had their own analysis, if they found any wrong and they were free to leave. But Goldman Sachs has to be a sophisticated. Don’t think about other. Your honesty is more important that your client. So it is mistake of Goldman Sachs to assume the wrong thing. So being ILLETARATE financial institute, being DISHONEST, the fine of $550 million to GS is the right

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