Imagine that you want to make a bet against a sports team, say the New York Yankees. The Yankees have had a strong run, but, poring over the data, you have come to the conclusion that they’re going to start losing. So you go to a bookmaker (in a district where bookmaking is legal, of course) to place a bet. The bookmaker now looks for someone to take the other side of this bet. Once the other party is found, the deal is made. That, in essence, is the transaction that took place in 2007 regarding the future direction of the American residential-housing market, in which Goldman Sachs acted as the bookie, and which the Securities and Exchange Commission now charges was “fraud.”
– Fareed Zakaria (full article.
Read Michael Lewis’s take as well.
So the question i have is, is Goldman Sachs (GS) obligated to inform Collateralized Debt Obligations buyers that they are about to buy a “shitty deal”? is the role of GS (in this context) suppose to be a impartial provider of a market for people to trade risk or are they are more like agents who owes their customer certain duties of diligence?
I am guess is that its either the former or GS’s role was simply undefined.
whatever it is, GS’s action dont sound very ethical (base on my very limited grasp of the law and what actually happens). which begs the title question – is it legal to be unethical?
hmmm… maybe MBA oath should have legal implication for clear violators and all managers of significant power should take it.