Goldman Is Not a God

Carl Levin is asking the same silly question that I've heard over and over:  shouldn't Goldman have told buyers that it was short?

The presumption is that Goldman has some sort of godlike knowledge that it was concealing from its customers.  It's not Goldman's responsibility to tell its customers what they should want to buy (or at least, not on the trading/ABS side), or what Goldman wants to buy.  It's Goldman's responsibility to make sure that its clients have all the relevant details about the securities.  Clients buy stuff from Goldman all the time that some part of Goldman is short; differences of opinion are what make marriages and markets. 

It is true that clients would like to know what Goldman is doing, but it's also true that the seller of the house I just bid on would like to know what my reservation price is.  That doesn't mean that I have some obligation to disclose this information.  These are large securities firms that are presumed to know how to evaluate a security; if they can't, they should turn in their charter and disband.

Goldman was making a bet.  That bet could have gone wrong  (not in this case, but in many similar).  Other firms had different opinions of the market.  Goldman was under no obligation to disabuse them of their opinions.  They're not investment advisers; they're securities issuers.

(Nav Image Credit: Mike52ad/flickr)

Presented by

Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

Why Is Google Making Human Skin?

Hidden away on Google’s campus, doctors at a world-class life sciences lab are trying to change the way people think about their health.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register with Disqus.

Please note that The Atlantic's account system is separate from our commenting system. To log in or register with The Atlantic, use the Sign In button at the top of every page.

blog comments powered by Disqus

Videos

Why Is Google Making Skin?

Hidden away on Google’s campus, doctors are changing the way people think about health.

Video

How to Build a Tornado

A Canadian inventor believes his tornado machine could solve the world's energy crisis.

Video

A New York City Minute, Frozen in Time

This short film takes you on a whirling tour of the Big Apple

Video

What Happened to the Milky Way?

Light pollution has taken away our ability to see the stars. Can we save the night sky?

Video

The Pentagon's $1.5 Trillion Mistake

The F-35 fighter jet was supposed to do everything. Instead, it can barely do anything.

More in Business

Just In