Saturday, April 24, 2010

Goldman Sachs: Evil or Genius?

In the midst of this struggling economy, you can always count on Goldman Sachs to make some money. From the New York Times:
[Email] messages appear to connect some of the dots at a crucial moment of Goldman history. They show that in 2007, as most other banks hemorrhaged money from plummeting mortgage holdings, Goldman prospered....In the third quarter of 2007, the investment bank reported publicly that it had made big profits on its negative bet on mortgages. By the end of 2007, the firm curtailed its disclosures about its mortgage trading results.
While Goldman vigorously denies claims about its significant profit, it will be interesting to see how the debate over the financial reform bill plays out in the Senate on Monday. Many Republicans are opposed to provisions such as the one requiring banks like Goldman to spin off their derivatives-trading operations into subsidiaries. As a result, they are threatening a filibuster, and the Democrats seem worried that it just might work.


  1. Isn't it a bit of both? I mean, in a sense, they were just hedging and then when they figured out the market was going to crash, they just bought up all the short positions they could. Such stuff probably should be regulated, but it is sort of weird NY Times expected Goldman to not only go down with the ship, but willingly sink it.

  2. I have to concur with 11:25. This witch hunt against GS is very unfair because hedging is a process that is simply accepted and legal finance.


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