investment advisor

The Amazing, Versatile and Unethical Goldman Sachs Code of Ethics

/ Jack Marshall / 6 Comments

Perhaps we all owe Goldman Sachs an apology. Everyone heaped outrage and ridicule the April spectacle of its executives going before the U.S. Senate and asserting under oath that they saw nothing at all unethical about intentionally selling “crappy” investment products to their trusting customers, then making money for their own firm by betting that the products would fail. Many were reminded of the tobacco executives, in the famous AP photo, all raising their hands to swear that they did not believe nicotine was addictive. After all, Goldman Sachs’s own website pledged openness, honesty, trustworthiness and integrity, saying,

“A critical part of running the marathon is acting consistently and playing a fair and honest game. ‘There’s only one thing we sell, and that’s trust.’ This applies to anything, but nowhere more than Investment Management. Clients trust us to do the right thing, and particularly when you’re in investment management and you’re appointed to manage clients’ money, they trust that you’re going to do it in a prudent manner. The worst thing you could do is breach that trust. We look for people who want to run the marathon, and who understand that trust fuels it.”

Now it seems that we were lacking a crucial document: the firm’s internal Code of Ethics, which Goldman Sachs recently made public. Under the provisions of this remarkable Code, what Goldman Sachs did to its clients wasn’t unethical at all; deceptive, conflicted, and unfair, yes…but not unethical, in the sense that it didn’t violate the Ethics Code itself. “Impossible!” you say? Ah, you underestimate the firm’s cleverness. Continue reading →

Goldman Sachs Ethics: An Easy Call

/ Jack Marshall / 5 Comments

Sometimes the biggest ethics stories are the easiest. I haven’t written much about Enron, for example. When a company uses deceptive, shell corporations to hide its liabilities so profit reports look artificially rosy and investors keep buying company stock, it is obviously unethical. Even the ethics-challenged management of Enron could figure that out. The Goldman Sachs scandal, once one clears away the static and spin, is almost as straight-forward.

Are the Democrats seizing upon Goldman Sachs as a scapegoat for the financial meltdown they, like the Republicans, were complicit in as well? Obviously. That doesn’t mean that the firm doesn’t deserve all the abuse that is being heaped on it. Did the S.E.C., supposedly an apolitical and independent agency, time the announcement of its suit against Goldman Sachs to help rally public opinion behind the Obama Administration’s proposed Wall Street reforms? It wouldn’t surprise me. We have seen previous Justice Departments, the C.I.A., the F.B.I. and other supposedly “non-political” entities act blatantly partisan over and over again. The S.E.C. trying to give Obama’s reforms a boost would be one of the least dastardly of these breaches, especially since the public should be informed about the kind of conduct the culture of Wall Street permits. G.O.P. complaints about the timing of the announcement are, to say the least, strange. Would it be better to hide this story from the public? What matters is whether the S.E.C. has a legitimate case. It is clear that it has. It may not turn out to be a winning case, but it is legitimate. [Note: Personally, I think it is  more likely that the S.E.C. announced the law suit to counter the embarrassing revelation that so many of its regulators spent endless hours on the job surfing and downloading pornography off the internet.]

The legal issues will probably be settled in court; the topic now is ethics. After watching the testimony of various Goldman Sachs officials before the Senate, I find it hard to see a credible argument that what the firm did—selling what its own employees referred to as “crappy” investment products to firm clients, and then betting its own funds that those products would end up losers—could be called anything but unethical. Continue reading →