Is this really what the Goldman brand is worth these days? Not that I disagree with you, but you have to wonder: given that they rely so heavily on their name, this level of distrust must be affecting them. Nobody wants to do business with the mob if you can avoid it.
Generally, the people who deal with Goldman don't care if Goldman rips off the rubes. As long as they believe they're not being played for a sucker, they see Goldman's otherwise-questionable activities as just part of the game.
The fact that Goldman has such a reputation for playing the people who aren't paying them, plays directly into the very notion that they do have unique insight and talent on offer to those who do pay them.
Haha, it's cute people STILL think that just because they're paying them, they aren't getting shafted too.
Before the mortgage crisis, they were advising clients to buy up subprime debts while in secret shorting them hard, because they knew they were toxic. They bet against their own damned clients... at least actual mobsters have SOME semblance of honour!
If a Goldman banker is patting you on the back it just means he's trying to steal your shirt.
Who do they rely on their name with? For investors, the image of a company of scheming masterminds who outthink everyone else in the market and make a profit off everything they do is probably actively helpful.
Haven't you kept up with the sub prime crisis? GS rated junk mortgage bonds with the highest rating AAA, and then bet heavily that the same bonds would sink. When they sank, they made windfall profits. This came out in investigations and they were given a slap on the wrist later by the government.
"As a result, Goldman made an approximate $4bn profit from betting on the sub-prime collapse, more than off-setting its own mortgage losses and ensuring that 2007 was a bumper year for the bank while all around are counting their losses."
They basically threw their clients like AIG(which was a massive failure requiring a huge bailout) under the bus for their own profits.
A few things : (i) Goldman did not rate any bonds, the rating agencies did. (ii) For every buyer of a security there is a seller. Goldman's trading desk (likely) had a conflict of interest with their bankers. However, just selling something that goes down doesn't make someone evil (it's logically similar to buying a stock that later goes up). (iii) AIG failed due to its own inadequacies : They believed that they were the smartest people in the room, when (in retrospect) they were making a huge blunder.
Oh now, it's like with Bernie Maddof. Many knew or suspected he was crook but thought he was cheating from others so they closed one eye and both ears or whatever, until they got screwed.
Trust what they say publicly as far as you can throw them... And only trust what they say privately if you have a gun to their head.