The Collapse of Goldman Sachs

Business | May 10, 2010 | Share

An event as pronounced as the recent economic meltdown is but of course expected to have devastating effects all around. Businesses are expected to crumble, and stock markets expected to crash. However, one can still expect some people to profit from a mess like this. After all, even the American Civil War had people like Rhett Butler making massive profits despite the general gloom and suffering everywhere else, as mentioned in the famous novel, Gone with the Wind. But how would you react if you realize that the people, who came out making profits from a mess like this recession, were the very people who caused it in the first place!

The executives at Goldman Sachs have revealed through their Emails that while the world was facing a major financial meltdown, the investment bank was continuously making money. In what seems like a very well guessed move, Goldman Sachs place itself in a very strategically sound position during the crisis. It bet against investors, causing rating agencies to downgrade the mortgage securities market by ~ USD 30 billion. It then took short positions in the mortgage market making close to USD 50 million while the market collapsed.

In a sense, Goldman Sachs promoted complicated financial mortgage schemes in the first place. They got credit rating agencies which labeled them as AAA securities, and were later sold to investors, spreading the risk throughout the financial system. These schemes caused the mortgage bubble to first expand enormously. Goldman Sachs then bet against these very schemes, changing sentiments. The bubble subsequently burst, forcing the market into freefall, an event for which Goldman Sachs was â€˜well positionedâ€™ for.

This situation majorly degraded Goldman Sachs status as the leading financial and investment bank when the government requested support from various banks other than Goldman. The White House themselves stated that the opinion of Goldman was completely irrelevant considering their role in the fall of the economy. Considering the fact that Goldman Sachs pumped in around $1 million in the Obama campaign and has given close to $24 million to various federal candidates with $2.4 million in the last year itself to fend off various federal officers and other lawmakers, they still seem to be getting minimal support from the various Congressmen.

It is amusing to view that an event as grave as this recession, which made the world plunge into the deep recesses of economic pessimism for years to come, was the result of such cynical, self-centered and also, queer, intelligent thinking by the corporate czars of the world, who rule its fate and guide its destiny.

Stacy Miller