Tuesday, March 2, 2010

BREAKINGVIEWS - Goldman Sachs needs to admit it made mistakes

The author is a Reuters Breakingviews columnist. The opinions expressed are his own --Tue Mar 2, 2010 9:55am IST

By Chris Hughes

LONDON (Reuters Breakingviews) - Even the mighty Goldman Sachs makes mistakes. The Wall Street bank's decision to help Greece keep some of its debts hidden from public view in 2001 was one of them.

The transaction allowed the Greek government to present accounts which understated the state's liabilities by 1.6 percent of GDP.

The arrangement was not illegal, not against any regulations and was approved by Europe's statistical authorities. Still, helping a client lessen the transparency of its finances is ethically questionable. For its own sake, Goldman should just admit that the firm compromised the principles it is supposed to hold dear.

At the time, it may have seemed that the deal's goal, comforting Greece's fellow members of the euro zone, justified the means. In retrospect, though, it's hard to reconcile such financial alchemy with Goldman's expectation that its people comply fully with the "letter and spirit of the laws, rules and ethical principles that govern us".

There are, to be sure, mitigating factors. Goldman, which carefully considers the ethical and reputational risks of individual transactions, wasn't alone. Other banks helped governments take advantage of the European Union's weak fiscal governance. But Goldman regards itself as the global standard setter, demanding "high" ethical standards of its people, and eschewing the practices of the crowd. full story

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