What Is Up with Wall Street? essay
Goldman is one of the largest banks of the US, which faced the threat of bankruptcy in 2008, when the economic recession had struck. However, the bank was saved by the US government and started to recover after the steep downturn in 2008. Nevertheless, the recovery of the bank raised many issues, such as the financial policies of the bank and the system of bonuses of the bank. In fact, the recent economic recession has revealed the full extent to which Goldman conducted its policies unethically and violated basic moral norms. In such a situation, the policy of the bank in the time of the economic recession seemed to be quite hypocritical, taking into consideration the fact that one of the largest banks of the US received the government support and still failed to use its funds effectively. More important, the recent government support failed to change the policy of the bank and the risk that the bank will carry on its risky policies persists. Hence, the problem to be investigated is the irresponsible and unethical policies of such behemoths as Goldman and the inability of the government to prevent such irresponsible policies that may be disastrous not only for large corporations but to the US financial markets and the national economy at large.
In fact, since the beginning of its operations, Goldman tended to have gray areas, which made its policy questionable from the ethical point of view. Nevertheless, as long as the bank maintained positive marketing performance and brought considerable benefits to investors, its policies and ethical issues remained unquestioned. However, in the time of one of the deepest economic recessions in the history of the US, ethical issues concerning gray areas in the policy of Goldman sprang and, today, it is not just a mere policy of ethical responsibility of the bank in face of its shareholders, but it is also the question of the responsibility of the bank and large business in face of the US nation. In fact, it is possible to distinguish gray areas of Goldman’s business throughout its history. For instance, one of the great areas refers to the use of funds of investors. For instance the company invested its funds and public funds and reaped benefits, which the company invested further to obtain extra profit. As a result, the bank used funds available at the moment to maximize its profits. In such a way, the bank used investors for its own benefit, while investors did not reap all the benefits from Goldman. Instead, Goldman maximized its profits at cost of investors.
Furthermore, the shift of CDOs was uncertain and quite risky is another gray area. In fact, Goldman used CDOs to increase its revenues and maximize its profits. However, the bank disregarded risks associated with CDOs. In addition, CDOs contradicted to the traditional policy of the bank and became the first step to the change in its specialization from the investment bank to holding bank. In such a way, the bank conducted quite risky operations, regardless of interests of its shareholders.
The insurance of CDOs investment by AIG was the complete failure and Goldman should be aware of possible risks AIG may face in the future. In fact, Goldman relied on the authority of the AIG as the major insurance company of the US. However, the bank should have conducted the investigation of the situation in the market and the prospects of AIG in the market. In such a way, the bank was apparently driven by the high profitability and underestimated risks associated with the investments.
Goldman obtained the government financial support in 2008, while in 2009 its profits skyrocketed as well as bonuses paid off by the company. In fact, this is probably the most arguable point in the policy of Goldman and the grayest area in the policy of the bank. In such a way, the bank conducted irresponsible policy in relation to the government as well as its shareholders because its policy in relation to bonuses, which were actually paid off at cost of American tax payers.
Ethical analysis of the grey area is closely intertwined with legal ones but still Goldman acted legally correct but from the ethical point of view the bank’s actions were unfair. In fact, virtually all gray areas raise ethical issues, which reveal the full extent to which policies of Goldman are unfair. In fact, reaping high profits at cost of investors is unfair and such policy irresponsible in relation to its investors because the bank should have conducted more responsible policies in relation to its investors. Furthermore, the shift of the bank to CDOs was also quite questionable from the ethical point of view. In fact, the bank conducted the risky financial operations in relation to its shareholders. In this regard, the policy conducted by the bank after Goldman obtained the financial support from the part of the government and paid off high bonuses to its top executives mainly. In this regard, ethical issues involve the responsibility of the bank in face of its shareholders, the government and tax payers, which are the major investors of the bank and its supporters in the time of the economic recession.
There are many stakeholders affected by Goldman gray areas. First shareholders, who counted on high profits but faced the financial problems and bailout. In addition, the high bonuses were unfair in relation to shareholders, who lost profits because of high bonuses being paid off. Second, average employees of the company faced the risk of job cuts and low bonuses, while the top executives of the bank gained maximum bonuses. Third, the government invested in the bank to support it in the time of the economic recession but the bank keeps conducting inefficient financial policies. American tax payers at cost of which Goldman was supported by the government are also victims of the unfair and unethical policies of the bank. In fact, American tax payers suffered from the policy of Goldman, which used public funds to survive the hard time.
The profit-oriented organizational culture determined decisions taken at all levels of organizational structure by executives, employees, traders and advisers. In fact, Goldman attempted to maximize its profits and conducted too risky operations with CDOs. The bank was just bluffing and attempted to raise its funds fast in what the bank executives believed to be the easiest way. This is probably why Goldman involved AIG, which was one of the most reliable insurers in the US, although Goldman did not conduct the analysis of potential troubles AIG could have faced and did face in the time of the economic recession.
The lack of changes in the management of Goldman and the lack of any material impact on the firm’s client franchise after the settlement are likely to lead to new financial crisis involving Goldman that may increase the risk of new economic crisis in the US. In such a situation, the bank conducts its policy irresponsibly and the bank is unlikely to change its policy that raises the problem of the moral responsibility of the bank in face of the US government and tax payers. In fact, the bank focuses on the interests of its top executives, while interests of shareholders, employees, the government and tax payers are of the little, if any, importance for the bank.
In addition, the management of Goldman will remain irresponsible, while the lack of any material impact of the settlement will encourage the top executives of the company to conduct even more risky operations to obtain maximum profits. As they are certain that the government supports them, they will not take care of effects of their decisions, which may become more and more risky.
Thus, taking into account all above mentioned, it is important to place emphasis on the fact that Goldman conducts risky policy. The bank focuses on obtaining maximum profits but the bank neglects the means it uses to reach its marketing and strategic goals. As a result, the policy of the bank is often highly controversial from the ethical point of view, while its recent policies have revealed the fact that the bank is unlikely to change its strategy in the future.
