That's actually the punchline.
Sorry. Tough room.
But seriously, folks, I don't mean to make light of what is a very, very unfortunate situation. What "situation," you ask?
Ah, well. Goldman-Sachs, the venerated Wall Street investment firm, has gotten itself into a bit of hot water with the SEC. And the Justice Department. And pretty much every American taxpayer. There are probably some other folks who're more than a bit upset with them, but you get the idea.
What'd they do?
Well, for starters, it would seem that they weren't exactly … honest. Allegedly. In a lawsuit brought against Goldman-Sachs by the U.S. Securities & Exchange Commission in mid-April, it is alleged that they conspired with a hedge fund operator -- John Paulson -- to put together a lineup of mortgage investments that were almost sure to fail. The investment pool, which they named "Abacus," was the Bad News Bears (or the Chicago Cubs, if you will) of mortgage securities.
Mr. Paulson was happy to invest $1 billion (yes, that's one billion dollars) from his hedge fund in the project. You know, just to be helpful.
Once this pool of bottom-feeding investments had been assembled, as it is alleged in the lawsuit, Goldman-Sachs took the investments to other firms, such as the Royal Bank of Scotland, PLC and IDK Deutsche Industriebank AG, and sold it to them. It's also alleged that they might not have disclosed the outlook of the securities nor about Paulson's involvement.
At then end of the day, investors in the deal lost more than a billion dollars. Mr. Paulson made over a billion because he had inside information and was able to sell his shares short. In other words, before they totally tanked.
Needless to say, those other investors are pretty ticked off. To say the least.
On May 4, the U.S Justice Department filed criminal charges against Goldman-Sachs (based allegedly -- I keep using that word … I wonder why -- on a tip from the SEC).
The crux of the case against the investment firm is whether they misrepresented themselves. As the charges were only brought today, and since I'm not directly involved, I can't indict them, as I haven't seen the evidence. That's the Justice Department's job.
What I do know is that all of this tomfoolery isn't going to do anything to elevate the image of the financial sector in the minds of the American public. To say that it's going to draw their ire is a major league understatement.
So, what does this mean for us? What does this mean for the everyday American?
It's hard to say, but it's for darned sure going to mean increased scrutiny on the financial industry. I'm hopeful that it's going to lead to some serious discussions about reform. Discussions about real regulation. Discussions about big players like this taking responsibility for their (alleged) actions.
There's one thing that I am sure of, however, and it's that there'll be no shortage of Goldman-Sachs jokes in the near future.