Goldman Sachs Cheated?

Why does Main Street not trust Wall Street? With reports like the one coming out about Goldman Sachs today, it becomes easy to understand. Allegedly, John Paulson’s multibillion hedge fund Paulson & Company with Goldman Sachs, put together a Collateralized Debt Obligation (CDO) pool of mortgages and sold that pool to the unsuspecting public.

Paulson then, allegedly, shorted that CDO on behalf of his own account or the account of Goldman Sachs. As an analogy, Pete Rose is banned from baseball and the Hall of Fame for life because he bet on baseball games that involved the Cincinnati Reds team that he was managing at that time. Rose could see the temperament of his players that day and he alone had control of the batting order and who would come in for relief pitching. Goldman handpicked the investments in this pool – sold it off to the unsuspecting public and then shorted that pool. Sounds very similar – but will the punishment be comparable? Somehow I doubt it.

Goldman’s stock is off more than 15% today – big deal. Does anyone really believe this is an isolated incident? Probably the gullible! I had heard rumors months ago that Goldman had put deals together for the country of Greece for them to demonstrate a stronger financial position to the European Union (EU). The rumor further indicated that Goldman afterwards placed short positions on Greece with the knowledge of already having looked at their books so to speak. Nothing ever came of that one. If that has any validity, it would have been another easy way to make money for the company.

Time will tell what comes out of these new revelations, but this will do nothing to instill confidence in the investing public that Wall Street is attempting to take advantage of Main Street on a wide spread basis. It was Thomas Jefferson who said, “Banks are more dangerous to the liberties of the people than the standing armies.” This helps prove Mr. Jefferson’s point! It is no wonder that the trading volume has been anemic on the exchanges. Much of the public has already had enough!