Investment bank Goldman Sachs has just been fined US$550 million for its handling of CDOs (Collateralized Debt Obligations) during the credit crisis. Specifically, the allegations were that Goldman knowingly sold these bad investments to clients as they then proceeded to short them themselves (bet against them). In fact, Goldman had hired Paulson & Co. (who run one of the largest hedge funds in the world) to help select securities that would be inside these CDOs. Paulson & Co. shorted the CDOs, and apparently Goldman did as well. Goldman Sachs contends they shorted the securities as a hedge against their own losses. Paulson & Co. made an estimated $1 billion on this short, the actual investors lost about $1 billion.
While Goldman was fined $550 million, the stock was up $800 million in market cap on the day. This means even Wall Street thinks they got off too easy.