Some pre-lunch finance blogging. Apparently they've dusted for fingerprints at the scene of Bear Stearns demise and they turned up a bunch belonging to Goldman Sachs. The rumors began circling the week before, and that Monday saw a big jump in the credit default swaps, but the last straw was a memo from Goldman to its clients stating that they would not be backing or trading with Bear.
As the article says "Should Goldman be blamed for this? Absolutely not. Bear Stearns was under-capitalized, over-leveraged, and stuffed to the gills with crappy debt." Just because Goldman was the first to the lifeboats doesn't mean that they were responsible for hitting the iceberg. Essentially it was a game theory problem. If everyone sticks together and keeps trading with Bear, chances are that Bear loses value but comes out the other side. Everyone loses money but not a ton. But, if one person heads for the door, it starts a stampede. The first out the door gets their money back, everyone else winds up with huge losses. So in a way, Goldman did it, but really, it was Bear's bad decisions that put them in that place to begin with.
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