Goldman Sachs

Goldman Sachs: lack of ethics?

After watching the documentary “Goldman Sachs, le banque qui dirige le monde” (“Goldman Sachs: the bank that rules the world”), that talks about the ethics of greed of this bank, I’m able to verify if the polemic actions of Goldman Sachs are morally legitimate according to the ethical systems and tools we’ve learned.

One of the most polemic stories about Goldman Sachs is the secret loan for Greece, in 2001, through swaps exchange with fictional exchange rates, which in practice allowed Greece to increase its debt without reporting these values ​​to the European organisms. Apparently, the bank and Greece made ​​a deal to lower Greek debt at 2%, but the operation had to be confidential. The bank charged a higher commission to make this financial engineering and, in 2005, sold the swaps to a Greek bank, thus protecting itself from a possible default by Greece. In early 2010, Goldman analysts recommended to their clients to invest in credit default swaps (CDS - instruments to make money with the worsening financial conditions of a particular country) on debt of Greek banks.

According to the utilitarism, which the main assumption is if the act fulfills the utility principle, we can say that the net balance of consequences was bigger if Greece wouldn’t go deeper on its crisis. It not depends on the distribution of the consequences neither the intention of the act. In this ethical system, we count negative effects with greater importance than positive ones. So the fact of Greece loses 600 millions is greater a loss than Goldman Sachs gains the same amount as a benefit. Therefore, this secret loan was an immoral thing to do, because the sum of the loss was huger than the sum of the gain.

Using the Kantian ethics, let’s see if the secret loan fulfills the categorical imperative. Could this financial engineering become a universal principle? No, because if it was universal, every country would do it and the financial organisms wouldn’t...