Goldman Sachs And The Subprime Mortgage Case

In response to the movie, “Wall Street” there was many ethical dilemmas that violated the Securities Act of 1933 and the Securities and Exchange Act of 1934. There was an obvious disregard for the rules and regulations set forth by the Securities and Exchange Commission. Gordon Gekko and Bud Fox have no ability to comply within the regulations, and see each avenue whether it be legal, or illegal as a means to increase their wealth. The demise of Gordon Gekko and the gopher, Bud Fox was as a result of their lack of ability to comply within the regulations. This movie highlights several business ethics violations, which are very evident.

The subprime mortgage crisis that took place in the united states was the start of events that led to the (2008) financial crisis, marked by a hike in subprime mortgage defaults and foreclosures. I seek to discuss in my paper the U.S. causes that eventually led to the subprime mortgage crisis. Like, low interest rates and housing prices, and how this eventually led to a localized credit dilemma in other financial regions that finally made a difference in the actual economy or the financial system. In earlier years, financial economic activity had grown rapidly and varying financial invention methods had been misused and abused vastly, which is the key cause of this multinational financial crisis/dilemma. In addition, the involvement of shadow banking companies as they played an important role in the collapse of the financial system crisis. Furthermore, I plan to list each economic issues included in this subprime mortgage crisis, as well as, other factors that eventually led to this crisis. I will be answering questions, such as the relief measures that were used to restore life to the weakened financial system.

Q1 – What was up with Wall Street? The Goldman Standard and Shades of Gray.

Goldman Sachs & Co is a company in the financial sector, asset management industry and sub-industry in investment management. It operates as an investment firm and offers a variety of financial service such as investment advisory and portfolio management service to mutual and pension funds, foundations and individuals.

Bank of America is one of the largest banks in the nation. It is a multinational company and it is recognized by its high revenue value. Unfortunately, Bank of America has endured many complaints and harsh views regarding their lack of ethics. Ethical issues occur when there is a blatant disregard to implement integrity, trust, and responsibility. In some financial institutions, ethical matters are displayed in the way the consumers are treated. Within the past nine years, Bank of America has diminished all of their ethical promises by revealing customer information without their permission; discriminating against consumers based on their race; and manipulating overdraft fees in order to benefit the bank. In order to assess these problems, it is vital to recognize what Bank of America claims to stand for and determine where their most concerning issues are generated from.

When financial fraud has occurred to the American people by the alleged “Too Big to Fail” banks on Wall Street, is it more productive to the economy and society to criminally charge the executives of these financial institutions or negotiate a civil penalty that compensates victims and reforms the deceptive trade practices of our nation’s largest banks? Further, if settlement is the best solution, why settle for the less money than the financial harm caused by the big banks? The following will discuss the negotiations behind the Securities and Exchange Commission’s (hereinafter referred to as “SEC”) settlement with Goldman Sachs & Co. (hereinafter referred to as “GS&C”) and Fabrice Tourre,

On July 2ed, former traders of Barclays are accused of manipulating the Libor interest, the standard rate of the interest for loans between financial institutions, to meet their own derivatives potions and make huge private profits. Their dishonest actions disrespected the customer’s rights and damaged the freedom of market. They behaved disloyally to the financial industry and failed to follow their moral values.

The problem to be investigated is the application of business ethics. In the business world, ethics are extremely important. Ethics are prime elements that help a business to grow and to become more productive. It is by applying proper business ethics that a business can operate in a moral or ethical business environment and managed to conduct all activities in a manner that maximizes profits while not compromising all other non-economic concerns(Schwab, 1996). Businesses have over the years failed to nurture business ethics in order to fulfill shareholders' interests and to have a culture that is oriented towards profit maximization and high performance(Jennings, 2012; Sims & Felton, 2006). This has led business to have gray areas in their activities. Gray areas are those situations or problems that do not fit exactly into any ethical analysis. These are the activities which may be represented to be immoral as a result of lying and false representations on the part of the business.

Because Goldman Sachs had to convert to a bank-holding company after receiving bailout funds from the United States government, Goldman must follow the Volcker Rule. The Volcker Rule limits a bank or bank-holding company from making speculative investments that are non-beneficial to customers and greatly limits the ability for the company to invest in hedge funds or private equity funds (Hoffman, 2016). This rule has led to the deleveraging of the balance sheet by traditional investment banking firms such as Goldman Sachs. As shown in the liabilities section of the balance sheet, Goldman has reduced securities loaned by 49.68 percent, trading liabilities reduced by 20.52 percent, and short-term borrowings reduced by 39.66 percent from 2011 to 2015. Conversely, Goldman has seen a 111.50 percent increase in customer deposits (good liabilities) over the same time

“Experience, according to the proverbial wisdom, is a great teacher, also we should learn from our mistakes, Or, if you prefer, good judgment comes from experience, and experience comes from bad judgment” (Greenberg, Alan). A firm understanding of the events that lead up to the financial crisis of 2008 is an essential learning lesson to all Americans, the recession experienced in the United States was felt globally. The collapsed of Bear Stearns was the beginning of a financial disaster that would take years to offset. The fall of Bear Stearns was so important to the financial history of the American economy, Professors at Harvard University developed a case study and in 2009 and began to teach the case study jointly to first year finance and corporate leadership

| #3 Paper- Case study: What is Up With Wall Street? The Goldman Standard and Shades of Gray

Buying influence or engaging in conflicts of interest: Goldman engaged in activities were the companies and their customers’ interest conflicted. Still they moved forward in making money off them. Also, although not specifically stated on the case, the fact many formers Goldman executives held government positions proved to be a conflict of interest itself. Some of those people still had strong relations within Goldman and it can be said that one way or the other Goldman took advantage of that.

As this financial meltdown continues, many employees start to question the ethics of their choices. Although Sam Rogers, the Head of Sales and Trading, strongly disagrees with Tuld and Cohen’s idea and warns them that dumping the “toxic assets” will spread risk in the

If the firm remains a partnership could the firm continue to compete on an equal footing with its competitors, would they be able to retain key employees? How would tangible as well as intangible assets be valued in its stock price as a public firm?

Lehman Brothers made massive dollar amount transactions which heightened the company’s overall net leverage ratio, which is an important metric when determining the overall financial position a company sustains. In 2007, Lehman Brothers operating numbers were extremely encouraging to the naked eye. The executives at Lehman Brothers however knew the company was in an extremely vulnerable position that investors were oblivious to, which was that they had bought billions of dollars in residential mortgage-backed securities. Management was under a great amount of pressure to come up with a resolution for solving this problem, at the same time the U.S housing market bubble was busting. The executives at Lehman Brothers elected to reduce the company’s net leverage ratio in a marginally unethical manner. This improvised tactic involved engaging in a large