November 01, 2009

They Saw It Coming

How Goldman secretly bet on the U.S. housing crash:
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.

1 comment:

Bukko_in_Australia said...

McClatchy is writing about this now? It's been common talk on the financial blogs for a year now that Gollum Sucks was shorting its own MBS products. Not that anyone approves, but the truth has been out there. Maybe now more people will pay attention, but it's too late. Only collapse can save us from the bastards. May their rotting corpses swing from lampposts...


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