What's Up with Wall Street

What is Up with Wall Street?

The problem to be investigated is what are the responsibilities of an investment bank outside of the sphere of legal compliance and more towards an ethical imperative in dealing with its investors. Wall Street investment bank Goldman Sachs is by all accounts the most hated bank in America (Smith, 2012). The media has contributed to this opinion within society but Goldman Sachs documented business practices and ethical attitudes contribute to this opinion as well. In the period since the bank’s creation, Goldman reputation changed from being the bank that not everyone might like to the bank that everyone despises. In the bank’s history up to the 1990’s, their reputation was highly regarded. There was a time that if Goldman’s underwrote an Initial Public Offering (IPO), the IPO had a no-fail image (Smith, 2012).

Fast forward to today, on April 16, 2010, the Securities & Exchange Commission (SEC) filed a civil lawsuit charging illegal activities and security fraud (Securities and Exchange Commission v. Goldman Sachs & Co. and Fabrice Tourre, 2010). The SEC filed a securities fraud action against Goldman, Sachs & Co as well as its employee, Fabrice Tourre. The charges stem from the packaging of subprime mortgages into securities and selling them to their clients with the knowledge that these securities were of junk quality and were bound to fail. At the same time, Goldman was betting against these securities and actually profited from them at the expense of their clients. However, Goldman disclosed none of this information to the investors. In fact, the allegations are that Goldman provided misleading information to investors (SEC v. Goldman Sachs & Co. and Fabrice Tourre, 2010). In the investment banking arena, reputation and trust are the catalyst of attracting and retaining investors.

This paper examines six specific questions that deal with the ethical culture at Goldman Sachs as well as the historical practices that brought Goldman...