When everybody's favorite happy chappy, Ben Stein, criticised the dubious practices of Goldman Sachs, he stirred a hornet's nest on Wall St. Personally, I think his call against GS is BS - he should have criticised every financial institution except Goldman Sachs!

Double standards

Dead-pan Ben proposed the possibility that GS sold sub-prime securities and also bet massively on those same securities dropping equally massively in value. While every other financial company almost went tits up in the credit crunch debacle, Goldman made huge profits from this tactic.

Some would say fair play to Goldman for betting big and winning big, when their competitors on Wall St wimped out or failed to see the play. I am sure money managers think it is admirable business, but Ben Stein (and I) think it is unethical.

Ethics never got in the way of Wall St and I think Stein tried to weave something blatantly illegal into the mix to try and effect some change. However I think Ben Stein got it wrong going for the jugular when he suggested that GS were running another strategy alongside that double dealing strategy.

The Stein hypothesis says that GS were not only betting against the sub-prime paper that they were selling hand over fist, but one of their senior analysts was systematically spinning a dire story of an impending housing market meltdown. In effect, GS is accused of using its massive and sneaky clout to lay the foundations for a housing crisis. How unethical is that double standard, if true?

The trouble is, I don't think Goldman Sachs needed to tell a senior analyst to spin the end to a housing bubble. Even before these dodgy sub-prime loans came along, housing bubbles have always occurred in over-heated economies. If anything, the analyst could be accused of conducting a sick documentary on the impending implosion in the credit and housing market, but market manipulation? Maybe, but more likely, Stein is shooting the messenger.

As someone with no interest in any financial company except E-trade, where we bank and hold some stocks, I think Ben Stein got the last piece of the conspiracy theory totally wrong, and should have concentrated on roasting every company except GS for falling so badly into the sub prime trap. GS knew that greed would win and sub-prime mismanagement would fuel the housing crisis, they just supplied the fuel! A bit like selling bullets and being accused of murder when someone fires it from a gun!

A sure fire investment

Anyway, if any investors have a spare $25, make a micro-loan to an entrepreneur in a developing country, via Kiva and appear in the graphic below. There is no sub-prime issue and you will get your money back (assuming you think 0.2% risk of non-payment is a fair indicator of a return!)