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Much of the economics news today is tied to the Senate panel hearing with Goldman-Sachs. If you don’t know already, Goldman-Sachs (and other financial firms) are being accused of contributing to–maybe causing–the current recession in the US. And the real sin, Goldman-Sachs made money while their clients were losing.

“The idea that Wall Street came out of this thing just fine, thank you, is just something that just grates on people,” said Senator Edward E. Kaufman Jr., a Democrat from Delaware, said. “They think you didn’t just come out fine because it was luck. They think you guys just really gamed this thing real well.”

I agree that new regulations need to be put in place, but why is anyone upset that financial firms are to blame? Their job is to make money, and they did that.

But throughout a subcommittee hearing lasting more than 10 hours, current and former Goldman officials insisted that they had done nothing to mislead their clients.

Yes, they were selling mortgages and short selling them at the same time. Do they have the resposibility to share their own pessimism with their buyers? I think a good analogy is someone selling a used car.

You have got an old car that you think will decline in value. Do you have a resposibility to tell the buyer that the car will be worthless after a couple of years? That is probably why you are selling. It is the buyer’s resposibility to decide if the car is worth the cost or not.

Of course it is difficult for the average person to know the markets well enough to say the value will go up or down, but is that the responsibilty of the seller?

If so, the US Congress can reinstate regulations on the market, probably a good idea, but with the deregulated market, who can find fault with the companies involved?

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2 Comments

  1. GS is the one behind Greece problem. It wants money this month and Europe believes it MUST PAY

  2. Currently, everybody is wondering who will be the final winner,Goldman Sachs or the US congress.I’m really not sure for that.
    On one side,the congress accused that Goldman Sachs deliberately hid the essential information about risks and manipulate the market. It’s not fair to those investors.
    On the other side, there’s no certain evidence that can prove whether Goldman Sachs was deliberate and vicious. The regulation of the US market is very incomplete and inadequate. e.g. Which kind of information should be provided by sellers? And how much information should be given? Is it necessary to give information to investors?
    Most importantly, the case of Goldman Sachs exposes the problem of US market. I heard that Mr.Obama has made the plan to promote financial supervision & to improve the efficiency and transparency of the market.


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