A History of Mis-Selling?

It's funny how I never get bored of studying history.
Even tho it seems to be repeating itself, again and again.
Here's the latest example :

Goldman Sachs in 1970
Now that's considering tt Goldman was possession of certain facts :
- It did not think that Penn cld get $100 mil in standy financing
- It refused to act buy and hold Penn paper
while it scouted for buyers, it wld only co-ordinate issue and
sale when ppl asked them for it
- It asked Penn Central to buy back $10 million of their CP
becos it dint think they were worth the $$

Add this statement on an internal circular.
[Black and white] "We do not want Penn Central paper
on our inventory."

Despite all of this, it continued selling the paper when customers
asked for it.
Customers might have thought it was safe becos it was
still rated "Prime" by the National Credit Office - the historical
equivalent of S&P.

Denial as usual from Gus Levy - head of GS :
"The whole thing is unwarranted.
These are professional investors who knew as much as we did
about Penn Central or probably more."

Goldman's customers sued.
In total, they claimed some $87 million.
At tt time, Goldman only had some $53 million in capital.

The most successful claimants got a pretty sizeable payment,
lump sum plus interest summore.
Those with lousy lawyers or settled privately got abt
20 cents on the dollar.
See the difference good lawyers make?
Fortunately for GS, they eventually only had to pay out abt $30 million,
and this was over a couple of years.

Even tho the $$ losses were still manageable,
Goldman's reputation took a rather big hit.
But they took it in a good way and learned to be more humble,
improved internal controls etc. and slowly worked their way back.


Fast Forward 36 years later - 2006
Goldman decides that the CDOs, CMOs, RMBS
and other wadhaveyou crap on its books are too risky.
Taking advantage of the AAA rating that these things
still carry, it decided to aggressively sell them to whoever was
interested.

Amazingly enuff, there were still customers wanting to
buy this stuff, and Goldman gladly dumped this stuff on them.
Going one step further, it bought CDS betting that all these
supposedly AAA stuff wld go into default - similar to asking
Penn Central to buy back their rubbish back in 1970.

Sure enuff, by the 2008 Credit Crisis,
most of these stuff have become worthless.
While Goldman has made a huge amt of $$$,
their clients have lost of the same huge amt of $$$.

Strangely, I haven't heard of anyone suing - yet.
Anw expect Goldman to use them same excuse that
"oh, these are informed buyers who did they homework
blah blah blah ... so it's really their own fault... blah blah blah."
Also, it might hav sth to wif Hank Paulson being Treasury Sec...
Mmm... Hmmm..

Once again, history repeats itself.
And with that, I must say that J.H and J.T were totally right.
They sold crap stuff to people who did not do their own due diligence.