Not so long ago, Lloyd Blankfein incautiously observed that Goldman Sachs did God's work. The Securities and Exchange Commission takes a dimmer view of the investment bank's activities.
The case the US regulator has brought against Goldman is damning. It alleges that just before the subprime bubble burst in 2007, the bank worked with a hedge fund manager, John Paulson, to market certain subprime mortgage-related securities. Goldman did not tell the purchasers that they were buying an interest in loans hand-picked by Mr Paulson, who took a very bearish view of the subprime market. Or that he had chosen them for their high likelihood of default.
The buyers were also not informed that Mr Paulson's purpose in structuring the deal was to take a short position against the investments they were making. This trade ultimately netted him roughly $1bn in profits, while the buyers lost their investment.