Profitably Prescient

by digby

Apparently, Goldman Sachs may have been lying to its investors while it was secretly dumping sub-prime mortgages. Who would have ever thought?

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.


They offed their toxic crap because they saw the iceberg coming and made a tidy profit at it. If they'd told people about it, others might have followed and then they wouldn't have made such an enormous profit. What's the problem? Sure the whole financial system eventually came crashing down, but Goldman came out smelling like a rose (after the government generously bailed out their insurer.) That's why they are called winners and we are called losers.

But gosh, I sure hope we don't try to make the case that the executives who conceived of and executed these plans did anything wrong, even it it broke a few little laws here and there. After all, they are the most talented individuals in the nation and we wouldn't want to see them take their expertise and their superior productivity elsewhere. Where would be be without them?



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