Goldman Sachs vs. Tourre

On April 21st, Goldman Sachs placed all blame on their employee (executive director) – Fabrice Tourre, for misleading investors on a mortgage-linked investment product in 2007. A United States panel (SEC – United States Securities and Exchange Commission) is investigating this case and they seem to suspect both Goldman and Tourre.

It seems Goldman Sachs is trying to keep its distance from Tourre and push blame towards him in hopes of getting off the hook or at least to get a lighter sentence. In addition, Goldman placed Tourre on paid leave and this could imply Goldman is separating Tourre from other senior executives. If there is an alliance between Tourre and other senior officials, Goldman may face a more difficult task in settling this case.

In my opinion, I believe (if Goldman Sach hopes to achieve the goals written above) Goldman would not be able to attain its goals. This is because “too large to fail financial institutes” have been demonized by Main Street. Wall Street is in very bad lighting and the public has high sentiments on punishing such firms – which they believe are the true reasons for the financial crisis. The United States government would most probably want to prevent future occurrences and may use Goldman as an example.

With changes to the Basel act (to increase liquidity within banks worldwide) and with Obama’s administration focused on reducing the world dependence on the financial sector, Goldman Sachs may be in a fix.

Lastly, Goldman Sachs may find it difficult to prove Tourre was the sole reason for launching this financial product. Goldman’s board must have known about this product and how it is being sold to investors as it brought them a $15 million fee for this billion dollar transaction. With this huge amount of money involved, blaming Tourre for being the only factor would be difficult.

I believe Goldman should step forth and admit to their wrong doings (assuming they were really wrong) as this would place them into better light in the future as consumers would see the firm as a responsible company. In short, playing the blame game would not aid Goldman in this court case and it may very well backfire and create more problems for the firm in the future.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a4wQK24j3.Mo&pos=2