Goldman Sachs and the Real Estate Bubble

Before outbreak of the financial crisis in 2008 there has been evidence of unethical cooperate culture by Mortgage Sachs, Morgan Stanley, Lehman Brothers, Merrill Lynch, and Bear Stearns, acted against the best interests of their clients. These banks used to sell their global investors highly rated and safe securities, but secretly beating against them that they will fall in price because they knew that these securities are junk and overrated. The CEOs and top management knew about these kinds of investments and became enormously wealthy while their investors lose their money. Investment giant Goldman Sachs and other stock brokerage houses developed mortgage-backed securities, known as collateralized debt obligations, then sold them “short,” betting that the mortgages would undergo foreclosures. When the housing bubble hit in 2008, the values of the CDO’s dropped and the short-sellers made millions of dollars. Meanwhile, millions of investors and homeowners lost nearly everything in the collapse

In your essay discuss what changed the duty of their business model from making money and acting on the best interest of their clients to make money and act against the interest of their clients and discuss some of the unethical practices by the above financial institutions with shareholders, clients and creditors. What are the outcomes of these practices on the company and its shareholders? What alternatives and solutions would you suggest to solve this ethical dilemma?

Grading criteria:

WHAT YOU HAVE TO DO:

You should submit a 1000 words case study report on Principle agent problem in business companies.

You must follow Qatar University’s formatting guidelines and include references. The report will be graded on the detailed criteria outlined on page three of this document. The recommended layout of your report is given in the following bullet points.

·         Cover page (your names, date & number of words)

·         Executive summary (A high level summary of the project)

·         Table of contents

·         Introduction (background of chosen banks, firm or institution)

·         What the chosen company is doing regarding your chosen topic.

·         Analysis and evaluation.

·         Recommendations

·         Conclusion (summarize all the above)

·         References

Your project should be no more than 1000 words (executive summary and any references and appendices do not count towards the word limit).

Reading list:

http://www.nytimes.com/2011/11/08/opinion/end-bonuses-for-bankers.html?_r=0

http://euractivgreece.blogactiv.eu/2013/06/30/124/