In the late 1990s when the internet was in its most rapid expansion, new companies which were internet-based began to spring up everywhere. Large investment firms saw the potential for great money to be made of these small companies. These large investment firms include but are not limited to the following: Credit Suisse First Boston LLC; Goldman, Sachs & Co; J.P. Morgan; Merrill Lynch; Morgan Stanley.

To start, these firms have two fronts, one it to work with investors, and the other as a bank for businesses. The firms� banking consultants were the people who the newly formed web-based businesses were relying upon for a financial outlook. These firms realized that they could lead the businesses into thinking they should �go public,� meaning opening up to the stock market. They were able to manipulate these businesses by guaranteeing profits instantly. At first, many companies were unsure, but because they had nothing to lose (they had nothing yet, that is, no profits) they went ahead.

Opening days went unbelievable well for these new companies. With the ability to buy stock as soon as it is available because time-consuming paper work turned into just clicking a button online, their stock was purchased in large quantities. However, the same large investment firms who told them to go public were the people buying hundreds of thousands of dollars in stock on the first day.

The problem with the investment firms buying the stock was that they would immediately turn around and sell the stock to private investors for more than they paid, reaping great profits. The next problem was that the investors did not realize they were investing in companies which more or less did not even exist because they had yet to make a profit or in some cases even produce and product or service. The firms� sly way of making money off ignorant investors, which became very common for a couple years, was called �flipping.� The firms� taking advantage of investors was also only possible because they were not �doing their homework.� Markey research analysts on television were also to blame for misleading the public. These analysts were in contact with the firms, especially financially speaking. Many analysts were previous employees of these firms, and so when it came time to suggest to the public what was going to do well they, for a little under-the-door money, would support these firms.

The government, after discovering that these large firms were knowingly taking advantage of these new companies and investors went to work breaking them up. The government, after taking the firms to court, fined the top ten investment firms (Bear Stearns, CSFB, Goldman, Lehman, J.P. Morgan, Merrill Lynch, Morgan Stanley, SSB, UBS, and Piper Jaffray) a total of about $1.4 billion. These firms also must totally separate their banking and investment business so they never again come together to manipulate the stock market as they had done.

For the complete analysis of what the firms had to pay and all the terms, visit the U.S. Securities and Exchange Commission website, specifically http://www.sec.gov/news/press/2003-54.htm.  

Moral Response

Large firms on Wall Street seem far away and only concerned with what is happening in New York, or so I thought. After watching Frontline�s Don Con, I realized that the firms� business could very well involve me. Although they are far away, their effects are far-reaching. They have influence through the media, particularly through television with stock analysts. Their business is not so much to help people, but to find out what way they can best take advantage of people.

I have realized that businessman in these firms must make choices that have both a good and wrong side. The good choices would have been to never begin to take advantage of people and not to be greedy for everyone�s money, no matter how easy it seemed to take. However, the firms all chose the wrong sides as they chose to take advantage of both new businesses and investors. They had a choice to report correct information of how a company was doing, but chose to tell investors incorrect information. The choice to do so was essentially a moral decision because they were lying. The analysts knew the information they were reporting was completely untrue and were only doing it because they were receiving bribes from large firms.

The businesses which were new fell under similar abuse. Bankers working for the firms were those who told companies they should go public. They also knew that if they went public the companies would probably end up falling apart after a short time anyway because the investments were being put into a company which had not yet produced a product or service to invest in. These bankers knew they were misleading the companies and did so anyway because when they did their firms had the opportunity to buy the stock and sell it for large profits.

These decisions were not ignorant. The firms knew very well what they were doing, that is, how they were lying to thousands of people just so they could make money. It amazed me that so many people could come together and make so many wrong decisions; however, it is not that surprising because it tends to be easier to sin or make a wrong choice when the rest of the group does. Not wanting to partake in the wrong action the bankers and analysts were involved in would have taken great courage because of the pressure to follow what the group did. Also, someone may have easily lost their job had they spoken out against it because the firms already knew they were not supposed to be involved as they were.

However, no matter how hard it would have been to stand out against it, each individual had a moral responsibility to go the way he or she knew was good, and not take the path of greed. Their mistakes and wrong choices made it easy for me to see how easy a mass wrong-doing is. I must guard against falling into this myself. Not only can this apply to a job, but in general, the pressure of a group can be hard to resist, but it is the right choice that is more important.