Goldman Secretly Bet On Housing Crash

A 5-month investigation by McClatchy Newspapers has found that Goldman secretly bet on the housing crash, went out and pimped the dickens out of assets it knew were junk, and may have broken securities laws in doing so. McClatchy found that Goldman…

# Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they’d misled borrowers or exaggerated applicants’ incomes to justify making hefty loans.

# Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean that companies use to bypass U.S. disclosure requirements.

# Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.

# Was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.

Whether this really constitutes fraud depends on who knew what, and when did they know it.

How Goldman secretly bet on the U.S. housing crash [McClatchy] (Photo: C. Barr)

Comments

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  1. vastrightwing says:

    That’s nothing. Do a google search on Goldman sachs bubble.

  2. Chris Walters says:

    Related:
    Inside The Great American Bubble Machine
    Matt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great Depression

    I do not vouch for the article as I *still* haven’t read all of it. I’ve had it saved to read for months now.

  3. holytrainwreck says:

    That’s why I call them Goldman Sucks.

  4. DirectMailFan says:

    There are-unfortunately-plenty of people in the GW Bush administration, as well as Obama’s, that used to work at Goldman Sachs.

    Then, there’s the current governor of New Jersey, who led Goldman during the last great bubble in the 90s.

    Sigh.

  5. Esquire99 says:

    This “investigation” was done by a newspaper, not any sort of governmental agency.

  6. FatLynn says:

    Well, it’s a good thing those responsible will be made to pay for their….oh, wait. Never mind, nothing to see here. Carry on.

  7. ConsumerPop says:

    Pete Rose got banned from the baseball hall of fame for betting against his own team…what will Goldman Sahs get?

  8. Skankingmike says:

    this isn’t news. We all know the big time capitalists are blood sucking scum bags. It isn’t until their old and had their fill that some of them become philanthropists. And then magically we all forget how horrible they were.

    Andrew Carnegie rings a bell, that guy was a super dick.

  9. bohemian says:

    So will someone in the govt. do something? The media is proclaiming the whole financial mess to be in recovery. With CIT and 9 banks failing today, GM and Chrysler asking for more money and too many people out of work I’m just not seeing it.

    There is way more going on inside these big banks nobody fully knows about yet. We could still see a sudden implosion.

  10. diasdiem says:

    Stock tip for today: Invest in companies that manufacture torches and pitchforks.

  11. Unsolicited Advice says:

    Until they prove that the two-tier treatment was a deliberate attempt to defraud investors, there is no grounds for a fraud investigation. If you can’t prove that Goldman had a gap between client-recommendations and legitimate analysis (reference Henry Blodget), it’s just a hedge. Hedging large inventory positions is legal, common, necessary, and encouraged.

  12. Ronin-Democrat says:

    end of story….. move along nothing to see here.

    oh elliot spitzer, had your whoring ways not brought you down you could be campaigning on your past hard work.

    • Chris Walters says:

      @Ronin-Democrat: Oh everyone else, had you not pinned morality on sex you’d have Spitzer in office.

      • MostlyHarmless says:

        @Chris Walters: *instant rimshot*.

        I could not agree with that more. However, wasn’t what he did kinda sorta illegal?

        I dont care about peoples dicking around (Ensign, Clinton) but I find it un-cool when the said dicking around is illegal or adversely affects other people (Sanford, Tyrol).

      • rosvicl says:

        @Chris Walters: Sorry, but Spitzer couldn’t really do the “sex is private” thing here: he made a chunk of his reputation by aggressively prosecuting prostitution cases, and publicizing that. If it’s illegal for Joe Schmoe to hire a prostitute, it’s illegal for Governor Spitzer.

  13. uncle_fluffy says:

    This plays into my personal financial philosophy: “Never give your money to people who play games with money for a living.”

  14. Trai_Dep says:

    In the name of all that’s holy, break these financial holding companies into smaller pieces, and restore Glass-Steagall. Before they get even more back on their feet.
    At this point in the game, we should no longer be surprised by their venal, corrupt practices: it’s like the scorpion and the frog – it’s simply their nature.

  15. johnfrombrooklyn says:

    Enjoy these breaking stories while they last. When newspapers die, so might these type of stories. Perez Hilton and The Drudge Report certainly won’t be out there doing investigative journalism.

    • morlo says:

      @johnfrombrooklyn: What does this story matter? It’s almost better to be ignorant, since Goldman will go on controlling the government; and being aware of yet another layer of hypocrisy and corruption will just make your head explode.

  16. twophrasebark says:

    Every person I know that works for Goldman Sachs makes a ton of money and yet seems incredibly angry and bitter at the world.

    No matter how much stuff you buy or how much you make, it will never fill that cosmically huge void of working for a company that contributes nothing to the world.

    Money isn’t everything.

  17. flipnut says:

    Living in Charlotte I think the real story should be “Where were the McClatchy Newspapers?” The Charlotte Observer pimped “affordable access to housing” for years at the urging of our banks. People have known about Goldman for years, the real story is how everyone looked the other way and those in the media that had a position to question were either shut down or didn’t have a clue about finance.

  18. mythago says:

    @Esquire99: Telling a company that it’s engaging in illegal practices kinda is telling it how to run its business, yes? And what’s the point of the SEC doing a report if (as you would seem to prefer) the government has no power to do anything but wag its finger and say “Bad company! Bad!”

  19. JGKojak says:

    Fuck ‘em – you know how Obama can be really popular? Go after these clowns, prosecute ‘em, and send ‘em to Gitmo to share cells with other people who want to destroy America.

  20. hi says:

    wake up… Obama works for them… 2nd highest contributions to his campaign were made by goldman sachs.

  21. KyleOrton says:

    @Esquire99: I wouldn’t blame you even if you thought that being done by a newspaper was the same as by a Minister of Information. News outlets have failed tremendously in this area for far too long to be easily forgiven.

  22. mazzic1083 says:

    @The Cynical Librarian: Haha brilliant advice if I do say so

  23. Skankingmike says:

    @The Cynical Librarian: I wouldn’t be surprised if in a 100 years we all forget about this mess and there is private school’s and public libraries dedicated to Goldman Sachs CEO’s who donated billions for funding.

  24. dragonfire81 says:

    @futuresuperbowlMVPJayCutler: I will certainly agree on this point. Media outlets are profit driven corporations now, more interested in selling blood and sex than doing actual investigative reporting.

  25. bmorg003 says:

    @u1itn0w2day: I read it and loved it as well. Taibbi is great, and he got a lot of help for the article from Tyler Durden of Zero Hedge ([www.zerohedge.com]). I had not heard of the website before Taibbi’s piece, but I am now a loyal visitor every day. Lots of great information that everyone should know.

  26. YOXIM says:

    @dragonfire81: You wouldn’t happen to know where I can get some of this sex the media outlets seem to be selling? I’ve got a little money saved up and am feeling kinda horny. :D

  27. MostlyHarmless says:

    @YOXIM: My question was not whether or not prostitution should be illegal or whether the current laws made sense or not.

    My question was whether or not – under the current laws – did Spitzer do anything illegal.

  28. dragonfire81 says:

    @YOXIM: Peruse the magazine rack near the checkout of your nearest wal-mart.

  29. Esquire99 says:

    @Trai_Dep:
    I have no problems with government investigations into areas that they legislate. Clearly a Government investigation into Goldman’s activities, especially if there is suspicion that they violated the law, would be within the government’s power. I have a problem with the govt. telling Goldman how to run its business and how much to pay its employees, but if the Government (SEC, Congress, etc.) wants to look into possible illegal trading practices, more power to them.

  30. econobiker says:

    @dragonfire81: The masses of sheeple want to know what exciting new tidbit about the death of Michael Jackson that you are holding out?

  31. Trai_Dep says:

    @MostlyHarmless: My recollection was his crime was to use escort services which tried to list the credit card charges under innocuous terms, which the FBI stumbled upon using statutes designed to catch terrorists engaging in the Global War On Terrorâ„¢. From these transactions, they charged him with some kind of fraud and/or RICO and/or Conspiracy.
    A stretch in every sense of the word, for a victimless crime, by an agency headed by a Republican that benefited by kneecapping a viable Dem officeholder with credible potential for running for the President.
    Who also angered well-placed Wall Street executives upset that Spitzer was raining on the Sub-Prime Luau a few years before it combusted to eviscerate the global economy (which, had he done so, would have saved untold trillions of dollars since the worst of the Sub-Prime excesses happened in the last two years).

    Yup. Sleeping with call girls: EVIL!

  32. twophrasebark says:

    @Mr.Duke:

    Someone sells you a car they know is a lemon and you say “they didn’t put a gun to your head?” IDGI. Is this a blame the victim post?

    Or maybe I am misunderstanding. Yes, there is always some reasonable responsibility on the part of the buyer, but the bigger issue is a company that sells assets it knew were junk in the tune of billions of dollars. Let’s focus on those guys before focusing on Joe Blow who may or may not have understand what he was buying.

  33. Skankingmike says:

    @econobiker: [www.gatesfoundation.org]

    [money.cnn.com]

    two of the world’s richest men like those of old who were cut throat and “evil” are now super big time philanthropists.

    it’s the cycle of life and very catholic. (even if they aren’t) DO evil things while young and repent on your death bed.

  34. rushevents says:

    @Nakko: Oh yeah those same newspapers that ignored Acorn for years, spiked the story about John Edwards and got scooped by the national enquirer for Pete’s sake!

    Yeah they do really well at those “investigations” they do.