In a recent investigation that tried to implicate GS in the murky CDO business, GS rebutted tthe prosecution by announcing that it sold these toxic instruments only to the most sopisticated players in the mortgage business who should have known the business before trading with it. Read more of in the FT.com's article here.
What this means is, if you are an Asset Management Company and have an on going affair with Goldman, mind your ass. GS can and will royally screw without compunction or regret. In the long term however, these statements are going to hurt Goldman more. If I am GS and I have a heavy exposure in the brokerage business, I wouldn't talk such BS and risk loosing clients by dozens. Just imagine a money manager going to his clients and saying "Sorry, as you know Goldman f$#*^% me so I lost your money". Why will any money manager in his right frame of mind again do business with Goldman when he knows that they can sell him phoney instruments at a high price, while going short on it all the way because it knew the prices are going to hit the rock bottom?
Putting it simply, its like this. You go to an expert to take investment advise, you are mislead into buying some junk as a valuable investment and then finally when it looses its value, the so- called expert cries, "You should have know this! You believed me? Oh how sad!"
To be fair to Goldman, if it had to bite the bullet of being a subprime crisis creator, it would have been end of game for Goldman. May be they are taking a calculated risk here too! After all clients can be coaxed back. But business can never be. Isnt it?
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