Wednesday, June 09, 2010

Bankster Capitalists Beware

An Australian hedge fund has filed a complaint against Goldman Sachs in US District Court (linked below) over an investment in a subprime mortgage-linked security that contributed to the fund's demise in 2007. The complaint details how Goldman pitched the deal to the hedge fund even as the bank's sales team and mortgage traders knew the market for mortgage-linked securities would likely crumble. The complaint also alleges that a Goldman senior executive described the offering as “one shitty deal” just prior to the sale to the hedge fund. The Australian hedge fund is seeking to recoup $56 million in losses from Goldman, together with $1 billion in punitive damages. Goldman Sachs denies any wrongdoing in the case.

The complaint is yet another public relations setback not only for Goldman Sachs, but for the investment banking industry as a whole. Goldman’s alleged malfeasance and conflicts of interest continue to raise serious questions about the nature and character of investment banking as a profession. Bankster capitalists beware.

Basis Yield Alpha vs Goldman Sachs

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Financial Services and Banking are in Desperate Need of Reform at the Top

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