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Goldman Bet on Housing Crash
Goldman Sachs sold more than $40 billion in securities backed by 200,000 risky home mortgages in 2006 and 2007, but the nation's premier investment bank never told buyers that it was secretly betting that U.S. housing prices would drop. Goldman's clandestine maneuvers enabled the bank to pass most of its potential losses onto others before mortgage defaults flooded the world economy. A McClatchy investigation out Sunday reveals that Goldman's failure to disclose deals may have violated securities laws. "The Securities & Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion," said one economist. "This is fraud and should be prosecuted." But another expert interviewed by the newspaper chain indicated that, depending upon what executives knew, the actions could have been legal.
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This situation should have been thoroughly investigated before a penny of bailout was released to them. Maybe they'll get off the pot and investigate and prosecute.
Frontline did an excellent report on the financial crisis. The choice was let Wallstreet rip off the public or let the public live with the affects of a total market collapse. --- The made the right choice but, it is sad to see the extent of the immorality that permeates the America financial system. We should know how much Hank Paulson (Bush's Bailout architect for those who seem to have amnesia) knew about the state of the market before he proposed the measures. How could he NOT have known that the Company he ran was engaging in these type practices.
The government does not HAVE TO lend through middlemen. That's where they (economic advisers) have everyone fooled. The interest that's being paid to banks on the money they got from treasury and the Fed, could be paid directly to the government instead. Much cheaper for taxpayers and easier on the federal budget.
mskitee: These investigations take months, if not years. By the time it was finished, we would have been in the middle of Great Depression II, with 20% unemployment among other disasters.
Sometimes you just can't wait for all the facts to come in...
and that's the truth AlanD2
But I forgot, we also need to make some laws and regulations on Wall Street, they just run too damn wild and as long as the tax payers have to pay for the mistakes Wall Street makes then WE THE PEOPLE should have a say in how they run their business, before it was all capitalism and freedom to invest anyway they wanted but that was before the taxpayers had to pay for their losses.
TIME FOR CHANGE WALL STREET, LAWS TO PUT YOUR ASSES IN JAIL
Absolutely right, Sandra!
Part of the problem is that the people calling the shots own and operate the "pot". The megalomaniacs have no connection with the USA; they simply own and operate it. What happens to the USA is of no consquence to these people as long as the money keeps rolling in.
It is pretty clear that some big money was shorting the market. The problem is that everyone has dirty hands, so there is a good chance we will never know the truth. Why is the Obama administration always calling out Wall Street, but never doing anything to get to the heart of what went wrong?
All of this information has been available for months in a series of articles Matt Taibbi has written in Rolling Stone. McClatchy and TDB are very late on this one. I wonder why an aggregator site like TDB hasn't linked to any of Taibbi's reports over the past year. Tina's pals at Goldman Sachs?
I really like Taibbi.
It's an "institutional" thing. Never mind that the institutions are collapsing. They'll keep milking the system til the "beast" is dead.
neverlate, The Democrats will never have an investigation into the housing collapse, because THEY voted against the restrictions that Bush and all Republicans tried
to get passed in 2003.
maryfrost2:
If you read the proposed restrictions you will certainly find that was another case of the fox watching the hen house.
People were shorting the market because the market was being played with the assistance of Hank Pulson:
Hank Paulson Held A Secret Meeting With Goldman Sachs In Moscow:
http://www.businessinsider.com/hank-paulson-held-a-secret-meeting-with-g oldman-sachs-in-moscow-2009-10
make the link work by ditching the space in goldman... sorry
so what, I also bet on the housing crash. It was simply too obvious.
A guy comes to my door, says he did a "drive by appraisal" and my house has doubled in value and i should take out a home equity loan.
and that was over 5 years ago.
I thought what nonsense is this and how many people re lending and borrowing on drive by appraisals, it is bound to crash
My bet... instead of borrowing more I started paying off my existing loan faster so i have more equity in the post crash world.
You are a genius.
I'm clapping for you... really!
Drive-by's have changed! There were (always will be) a lot of folks who wanted to sell and buy something fake. And you should be proud now of your foresight then.
In my opinion, any fool could have seen where the housing market was headed. I've been called a lot worse than that on this site, BUT I did understand where it was headed, so I sold my house and advised my son to do the same, which he did. We all are now paying dearly for the morons we had running Washington, and it looks like we have
not wised up much either.
I understand that another wave of foreclosed properties are in the works----I am betting that some of them are people that just bought this year because of the 8,000 bonus, and I bet that we are STILL putting people in homes that cannot afford them. I'd like to know if any of them were buyers that used the 8,000 credit.
maryfrost2,I agree with you that many that thought they were on the opportuity wagon need to suffer. But there are hundreds of thousands, of people swindled. There was no oversight,no control, no monitoring, Remember,the banks made money, the realtors,the mortgagers,the appraisers, where was anyone checking in. Take an acorn situation. With a quota to give out home, unsophisticated,untrained,loan officers,Many decent hard working people,are stuck with properties worth half of the loan,the taxes do not adjust, the fees are unfair, they force you to start foreclosure then they will,maybe,make a deal.If you bring a short sale buyer,they give the mortgage,but they do not want to give a readjusted mortgage to the owners,and all these big banks, big wall street, companies got help, and what happened to the 70%that receive nothing.American families should have been helped not the big companies,big banks,big ceos,nothing, no jobs,business,credit lines for people.
amapola101:
Welcome to the new world order... The hardship that we are experiencing is not by accident. The cleptocracy that we are witness to is all for the amusement of the oligarchs... but the fun is just about to begin. I am thinking that the US dollar's value will drop to nearly nothing after inflation drives it's havoc.
Now here is a surprise..
Naked Short Selling on mortgaged securities you developed and had rated by your boys at S&P, sold at a bogusly over rated AAA... and then with your Goldman implanted Wall Street Journal Op-ED collumns telling everyone the sky is falling, they couldnt lose..
Gosh, do you think things stink in NY auntie Em
Although blatantly immoral, nothing will happen. Goldman is Goldman..Heck they will probably come up with the excuse that "if you prosecute us, all our talent will leave" then who will really run the economy?
They did the same thing with oil last year when prices were $145 a barrel.
You have to ask yourself why is the Democratic Congress not conducting a detailed investigation of the events leading up to this mess?
No one, not GOP or Dem, wants the real truth to come out about this situation.
This situation represents what is horrible about our government, and I don't think many of them are 'clean.'
kdj: exactly.
kdj-kdj, You are right, none of them want the facts to come out, but the consequences of their actions have been too devistating to everyone but them.
We must let them suffer the consequences of their actions also.
To make a partisan play about anything in our government is to allow the guilty to distract us from the real crimes.
By the way, I also bet on the housing crash by ignoring every piece of financial advice out there and paying off my house in 10 years. I thus largely avoided the market crash that was obvious to anyone with any sense of responsibility. My wife used to moan that our neighbors were all making "so much money" as evidenced by their swimming pools, multiple new cars, vacations, etc. It was obvious to me that they were living large on credit and home equity. We continued to drive our used vehicles and pay off our house.
Our bank used to "cold call" us every few months and ask why we had a pile of cash in our money market when we obviously were missing out on much higher returns in the market. He was obviously amused when I naively told him that I didn't trust the market after 2000-2001.
My neighbors are now in a living Hell. My wife and I just took our money out of the bank account and paid cash for a long deserved Fla. home we bought for 30% of its previous market value. Patience and common sense are the best long term investment.
Unfortunately, President Obama has decided that I must now pay the bills for my neighbors. And you wonder why people are buying ammunition and moving to South Dakota.
People are?
Anyone who has lived in the USA or had a basic course of economics 101 knew that Greespan was on tilt. Any bet against Greenspan was a good bet. Not surprising there were other economists on the government payroll that tried to stop Greespan and his cronies however Greespan, Robert Ruben, Aurther Leven and others had more muscle and talked congress into allowing the downward spiral to continue. In 1998 an economist named Broxly Borne went before congress and tried to stop the Greenspan debacle but congress would not listen to her. The bottome line remains that anyone with basic knowledge of economics and marketing would know that Greenspan and his wonderful Federal Reserve banks had to have known that what they were doing was destined to fail but did it anyway. The question remains, "who was calling the shots"?
That was a great piece on FRONTLINE about Broxley Born and her fight with congress. But some of this stuff takes more than a basic understanding of Econ 101. How many of us understand "Derivatives" and the implications? She still is unconvinced that we are out of the woods yet.
If there is one person that we can lay blame to it would be Greenspan and his belief that the free market would trump all. We need regulated markets where all the players know the rules and there is a competent "referee" to oversee the markets and the players. Presently it falls to the govt, but unfortunately, the govt is coming under attack from all sides, precisely at a time when when we need it most.
rvnmaniak, Another problem is there are too many people that just "live in the moment" like you mention above. Too many people want it given to them, and are made to think that they deserve it given too them. While the government encouraged the reckless behavior of the people who bought homes, KNOWING they could not afford them, the people also, in my opinion, deserve to learn their lesson.
I am not talking about those that could afford their homes at the time, but have lost their jobs. But we all know that a person making $30,000 to 40,000 could not pay for a $500,000 home--they knew it too, but just did and said whatever it took
to get it---AND IT WAS EASY TO DO. There were too many stupid people buying and too many stupid bankers leading. NOW WE SUFFER.
I thought they had a 1000 FBI investigation into wall street and the Bush administration?
FBI are trained and schooled in laws so they would be our best bet to bust these assholes
Greenspan had a hand in the housing mess also, as he kept the interest rate too low, too long. He knew better but went ahead and allowed it to happen. Even I knew better.
neverlate, We should insist that an there be an investigation into this housing collapse, and everyone involved should be fined and jailed. The facts need to be brought to light, and we need to clean up our government. How can we expect things to get better when the SAME PEOPLE are running it. We can call our congressmen and senators and insist on an honest investigation.
dodd and barney should be all over this
give it time
you have to be joking
Should be or will be?
You all need to know the part that Chris Dodd and Barney Frank played in the housing collapse. They should be in jail.
Dodd and Barney caused it.
The Democratic Congress is not conducting a detailed investigation because it will reveal that Bill Clinton's push to provide mortgages to the unqualified inner city poor was the instigator of the entire mess. Failure to qualify for traditional mortgages was seen as racist, not allowing largely minority and poor populations take part in the American Dream. For this reason the "old fashioned" requirements of down payments, documentation, and credit history were thrown out the window.
This not only set Freddie Mac and Sallie Mae as the biggest losers in all this, but also CAUSED the upward spiral of house prices as everyone and their brother could now obtain stupid loans with no financial knowledge or experience behind them.
If the Democratic Congress wipes the dirt off this mess hard enough it will expose a mirror for them to see their own faces. For now, they can just lazily blame Republicans and continue to take our country down by taxing and spending us into irreparable destruction.
Yeh yeh, ACORN caused the housing crash. Thanks for that penetrating analysis.
So where's YOUR analysis??? I don't see the word ACORN mentioned in rvnmaniak's post..tell us..where is it?? Barney Frank badgered and threatened banks to make loans to sub marginally qualified people..those loans were made and picked up by Fannie Mae and Freddie Mac...those loans were improperly documented (fraud) and sold fraudulently to people who thought government backing meant "prudent and safe." Enough analysis..or do you need more???
Now that you mention ACORN, they DID also put A LOT of pressure on banks to make loans to people that could not afford it.
Yes WSJ is (mostly) responsible for the debacle; he signed the financial modernization law, effectively bending over for Wall St. in a quid pro quo to get enough votes to beat the rap for sodomizing an intern and lying about it. Without a lot of sleezy dealings like this, he would have been booted out of office. Now, let's see if Pres. Obama has the spine to start sending the Goldman banksters to jail. BM is in jail, and the Goldman managing directors should be in jail too. Stay tuned.... George Patton
As long as campaign financing stays the same, nothing changes. The folks with the money make and break the rules. When they go bust, the rules change.
If there's one thing I know about Republicans it's that they run on a fuel called hate and seem to be motivated by opposing anything and everything that might help the USA. In the past they sold out to the fascists and afterwards the vacuum that remained was filled with chaotic hate mongers. These people hate anything and everything with nothing they do making any rational sense.
lostpatriot, It looks like you are blinded by your hatred of Republicans. Why don't you mention some specific things they are against, then we might have a counter
to your comments.
WOW... did you run out of Kool aid?
What's to counter... I think LostPatriot is pretty observant.
No one cared about TRUTH when making these home loans--AND I MEAN NOONE.
maryfrost2 you are right no one,from any party, from the congress, from the administrations cared. Alot have profited,so many and 70%of the US people are raped.Maybe much more, are genuinly hurt in one way or another to no fault of their own. Being a leader is also caring for your fellowpersons,your masses and watching out for them.Administering and supervising, so people are not blindly hurt. And then the bailouts, are not for the people,but for big banks,corporations,wallstreet, &govt.
I think we should all just walk away from our mortgage.Oh... and the home equity.
kscr14? what equity? it's all gone
I meant the home equity loan.
Alot of people are destroyed and are walking away, from loans, that are absurd,the property is worth half,the taxes,are to high the maintanance is ridiculous,young people who were swindled have no help.The gov. gave alot to those who were responsible, and nothing to the people,who are devastated and bewildered.and lost.No help for people.None
..depends on what the executive knew -- like they're going to start spouting the truth now. GET RID OF GOLDMAN SACHS AND TOO BIG TO FAIL!!! These companies are gambling schemes who have created millions of losers -- the AMERICAN PEOPLE.
And our government did NOTHING. Thanks, Government.
Yeah... the last 30 years has been a black hole for Presidents and politicians in general.
Our government is not going to do one thing to GOLDMAN SACHS, unless it is to bail them out again if they need it.
The Republican right wing hates gay people, family planners, environmentalists,
socialist programs such as road building, hospitals, garbage collection, postal service, socialist Veterans administration health care or any health care that is government sponsored. Republicans hate the word "socialism" even though socialism is the biggest part of the USA given that socialism sponsors everything from the food you eat to the roads you drive on. The Republicans are a chaotic hate group. Republicans hate the Muslims, Kennedys, Clintons, (and their children dogs and cats), If you want to hear their leaders spew this hatret tune into Glen Beck, Rush Limbaugh, Ann Coulter or any of their leaders. As this is written the Republicans are trying to stop progress towards bringing the USA out of its depression and ruining chances for health insurance for the citizens of this country. Republicans are probably the worst hate group ever to exist on this planet. Their leaders such as Rush Limbaugh and Glen Beck are making efforts to ruin the USA.
Lostpatiot... wow .. you my friend need some help
I think that what LostPatriot is pointing out is that the neo-con's need the help and this link further points out the basis for all of the outrageous partisan attacks and the stripping of our collective assets:
http://www.oldamericancentury.org/14pts.htm
The victims in this situation need to demand a full investigation into what happened, like what the widows of 9/11 did. They need to kick goldman sachs out of the government and make a rule that public servants should not have any ties to companies that stand to benefit from their decisions, or Goldman Sachs is just going to own us all.
One problem, lsg280. They already own us.
The 9/11 commission was a complete joke. No one was held accountable for the massive flaws in the system that allowed it to happen. Cheney and Bush were allowed to testify together, off the record, with no recording, only to a select group that didn't include the media or 9/11 family members. They could have lied, perfectly legally - while Clinton had to testify under oath for a consensual tryst!? Most of those who made mistakes were promoted. No one even lost their job. This was unprecedented. What a joke.
I came across this today... From Paul Craig Roberts, assistant undersecretary of the treasury to Ronald Regan. He rips the G.W.Bu$h administration for 9/11:
http://vdare.com/roberts/090914_propaganda.htm
They already own us, this is not the land of the free this is the land of surfdom
Hello US SERF, that's what we all are now, and goldman? we belong to China
Land of surfdom! I'm listening to Pet Sounds as we speak! ¡Qué casualidad!
Actually, some companies DO look at their employees as nothing but dispensible surfs. There's this thing called a "dead peasant" insurance policy, which is when a corporation takes out a large life insurance policy on an employee, and names themself as the benefactor. This is done without informing the employee, and the family doesn't learn about it until after the employee dies. They evaluate how many mortalities they expect to have among their employees during the year, and, based on this number, take out an accordant number of policies. The benefits from these policies can be up to $5 million.
That's all we are to them. A peasant that could make them $5 mil if we die.
"""public servants should not have any ties to companies that stand to benefit from their decisions"""
==============
Isn't there already a law like that?
If so, why aren't Cheeeney (Haliburton) and Rumsfeld (Gilead - who makes Tamiflu) on trial?
Spare us the Bush bashing..how about members of the Obama Administration that became filthy rich off Fannie Mae and Freddie Mac?? And were helped by the House (Barney Frank, et al) to intimidate banks into lending money to people with NO ability to pay it back?? Fannie and Freddie then fronted these loans...packaged them up..and shoveled the trash out onto someone else. It seems to me that selective memory hardly does this issue justice.
Let's not forget Andrew Cuomo who was the head of H.U.D. in the Clinton Administration, he put a lot of pressure on banks to give loans to the minority. I wonder if this subject will come up when he runs for Governor in N.Y. City.
It would be wrong, as Richard Nixon used to say, to point out how lost our winnie is amidst the hurly burly of modern life: here with her belief that cities have governors. So I won't do it.
I thought he was running for President of New York City... ?
Its quite obvious that a trap was baited, set and to their benefit sprung.
The problem is not that there wasn't or isn't enough regulation or proper investigation..the real issue has always been moral hazzard. If YOU incur a loss..no one else is expected to bear the burden. Yet...Bush..Obama..both bought into Henry Paulson's spin control nonsense. They bought the FEAR..and we'll pay for it. Here's what should have been done.....
1. No bailout...no buying into former Goldman big shot Paulson's coverup. The financial system MIGHT have crashed..as it began to do in late 2008 and will do in the next year anyway. If had been allowed to go down the US could have started with a fresh set of groundrules..and corporate welfare could have been tarred with an indelible brush that would benefit every citizen.
2. The losers in Goldman-Sachs little two step fraud could procede with civil suits..all the Insurers that stood behind the garbage Goldman shovelled out the door could have gone after them tooth and nail.
3. We wouldn't be sold the lie that better regulations will insulate us! Every financial firm has..and always has had..a fiduciary responsibility towards their clients...sue 'em..just like Madoff.
4. NO BAILOUTS..for anyone..anytime..any reason.
People need to know the disgusting, incestuous relationship Paulson had with the government and Goldman-Sachs at the SAME time.
Why are you so eager for Great Depression II, Georealist?
You may be financially prepared for it, but millions of less-fortunate Americans will suffer if it happens.
The bailouts to Goldman... et.al. did not go to the banks... the money went to the holding companies that own the banks and the holding companies have not released the money... the holding companies are hording the money... hence the continued liquidity problem and bonuses that were generated off the profits from the investments from that money.
These are our collective assets being used for the amusement of the oligarchs... at our pain and expense.
What do you think unemployment would be right now? 25%? 35%? Higher?
I say hang 'em all on Wall Street, liars and a bunch of cheats, they sold us down the river like a bunch of French whores
That's an insult to French whores
You would get a kick out of watching Max Keiser:
http://maxkeiser.com
oh begeezers come on did people really think the housing bubble wouldnt pop?
They knew that all these "assets" were worthless the whole time, yet they sold them all over the world. All of Wall Street was doing it.
I've said this all along and this is just more proof of it.
So where's the special prosecutor? Is there anyone left in either political party that gives any thought to protecting the common people against big corporations?
No. They've convinced themselves in Congress that if they take care of corporations, corporations will make sure the country runs smoothly. It's a convenient delusion which maintains the status quo. Keeps those who have power, in power. It's really no different than kings and aristocrats.
They keep us distracted with arguments about gay marriage and abortion.
First, Goldman Sachs is no longer a bank, it is a very large holding company. Goldman Sachs helped create and engineer the residual risidual crash. They are one of the largest owners of the Federal Reserve banking system and get a 10% cut from every dollar that flows from the USA treasury dept. (your money). After that they receive another percentage from money they distribute to the smaller banks in the form of loans. So, if all the owners of Goldman Sachs remain sober their is no way they can lose money unless the USA falls and that may happen from the greed and hate that exists in the USA today.
Lostpatriot:
You get it!
Ya gotta love the realities of free-market trading. They were just doing what any good risk manager would do.
There are no ethics in the conference room only maximization of return.
My understanding of a ponzi scheme is when you dump toxic assets on other people, who in turn dump their toxic assets on other people. If that is the case, then this is a massive ponzi scheme. They even dumped their assets on states! Why aren't they in jail?
That's not much different from musical chairs and regular stock trading.
This article states that Goldman was the only big bank who bet against housing while selling products into the street. They are wrong. Mark Pittman at Bloomberg wrote an excellent piece at the end of 07 detailing how Deutsche Bank did the same thing. An asset backed trader named Greg Lippman lead the charge to create the ABX index so they could bet against resi mortgage securities and made the bank near $1bn trading against the housing market. Banks run trading and sales as individual groups with their own chief decision makers. I would instead see this as way to hedge their macro view and find nothing wrong or illegal about running both sides of the trade. It was smart business.
They did not play both sides of the game. They realized that they bought toxi assets, so they peddled them onto other people by giving the products triple-A ratings. Otherwise they would not have been able to unload their toxic assets onto other people. Thats fraud. They gave the fraudulent ratings. That is not smart business. Thats illegally covering your butt.
Okay, thats not true. I don't think they were the ones to give them good ratings, but they knew that the products were not actually sound, and they mislead the people they sold the products to.
THERE IT IS AMERICA THE GAMBLE THAT HURT YOU........! and your 401k The way to get these gamblers back is SAVE don't spend take your 401k out of there hands, protect it in a ANNUITY make a run on GOLDMAN SACHS take everything you have out of them and move it
Death Bonds, the next scam. Here is what is coming next from Goldman-Sachs:
"Goldman's newest money-making risky products are securitized life insurance "death bonds." Goldman is poised to prey on and profit from the sick and elderly by buying their life insurance policies, (a potential $26 trillion market) then bundling them up and selling them to investors. Investors pay the premium and then cash in when people die; so the longer people live, the lower the return. It's up to Goldman to get the right mix of diseases in their bundled bonds to reduce risk for the investor. However, whatever the outcome (like those mortgage-backed securities) Goldman wins, since the company will already have pocketed substantial fees from creating, selling and trading these bonds, and Goldman has even developed a death bond tradable index so investors can bet on people's life expectancy." (Taken from the SEIU website).
To all those who took money for mortgages under the CRA and to all those who allowed the government to force them into these bad financial programs and schemes, I hope you're all living in he**. And to those in government like Barney Frank and Chris Dodd who stood and supported these boondoogles, there's got to be a a really hot spot in he** for you guys!
Chris Dodd, Donna Shelelah,and there is alot of others, received, extremely good mortgages, different than the people on the street, from Mozillo,countrywide. BF CD are especially to blame,they knew what was going on. They and many others knew.
1.Get alumni and confidantes in high gov posts as a precaution. 2. Manufacture toxic wastes 3. Force it on unsuspecting nation 4. Infiltrate alumni inside competitors and thus manipulate their decision makers to sell the same toxic waste 5. When the infiltrated competitor is thus weakened issue SELL advisories with fanfare to get the competitor's shareholders to dump the competitor's shares. 6. Get the gov to appoint self as advisers to bail out meetings. 7. Advise gov to force weak companies on competitors to kill them7. Then shamelessly partake the same bailout money too along with others - free lunch in soup kitchen for billionaires too!
Thank you.
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