Question

do the ends justify the means in the goldman sachs case, as it turns out? explain and offer evidence.

Answer 1

Goldman Sachs is one of the few companies that were able to overcome the financial crisis that occurred in 2007 sub-prime mortgage crisis and also was able to generate a profit of $11.6 billion. The reason for such improved performances have been the remarkable probes in the management style and structure of the organization. Goldman Sachs has a flat organizational structure which means that the communication would reach all directions and at the same time.

                                    On April 2010, the Securities and Exchange Commission [SEC] charged Goldman Sachs with a case that alleged them of defrauding with the investors by misstating and omitting key facts about a financial product linked to sub-prime mortgages. The product was ABACUS which was a Collaborized Debt Obligation [CDO]. The hedge fund took a short position on the product and mortgaged securities betting on the residential mortgages to fail. Placing the securities in a CDO would lead to hiding the true value of loans and thus would mislead an investor. Although Goldman Sachs knew the potential harms of the product, they still went about to choose the product considering the profits. The actions were deemed fraudulent in structure and marketing. Then Goldman Sachs went in to a settlement with SEC alleging that the material information of ABACUS was incomplete. But Goldman Sachs was charged with a settlement payment of $550 million which was the largest settlement payment in the history. In addition to the monetary settlement, the firm was forced to make changes to the internal structure and training modules and the settlement resulted in creation of new-industry vide regulations.

                                    Thus, when we consider the above results of the case, it can be seen that the actions taken against the firm is justifiable. The firm tried to take advantage of the falling house-prices by betting on the failing mortgages and hence earned huge profits. Although it was alleged that the ABACUS product did not reveal the material information, the inherent laws were made use of by the product to achieve this. Thus, some of the fraudulent contributions of the case were achieved by making use of the flaws of the inherent laws and mechanisms. But, the fact is clear that once a fraudulent activity occurs, then proper actions would be taken to prevent such cases in the future and many new-industrial regulations were also introduced as a result of this.