In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman‘s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.
Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman’s failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.
The point is that none of this was regulated, it fell outside the jurisdiction of the SEC and CFTC.
Not regulated huh? As I understand it, parts of whatever it is you want to talk about were regulated, and parts weren’t.
The AAA Mortgage backed securities that were closer to junk bonds got those ratings thru regulated rating agencies. They all committed a type of fraud.
You can bet against the housing bubble, and you can buy into the bubble and both are legal. Its only illegal when you do both===especially when you do the first with your money and the second with other people’s money.
So many things really are crystal clear here including the fact that no one has gone to jail other than those who confessed, the bubble is being rebuilt, laws to prevent this in the future are being avoided in favor of laws that will mandate this all happens again.
Yes, all very plain to see.
Now I know why the new head of the SEC came from GoldmanS.., to ward of any possible investigtion into securities fraud. Where’s the outrage?
Goldman Sachs would have never been able to sell these “securities” without the insurance companies guaranteeing their value. Thus the “moral hazard”: it didn’t matter what the actual value of the security was, it only mattered that the insurance company (and the ratings companies) said it had value. (Kinda like government issued carbon credits.)
#23 I can resume your post in one word: change
You guys are making a sinister plot out of a typical case of one corporate hand doesn’t know what the other is doing.
ANybody who has worked in corporate american knows the level of Keystone cops activity in a US corporation is only exceeded by the keystone cop activity US Government.
These guys companies count pull off this kind of “Conspiracy” if they wanted to.