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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.
mskitee
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.
case1234
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.
barrett
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.
AlanD2
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...
SandraZ8122
and that's the truth AlanD2
SandraZ8122
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
AlanD2
Absolutely right, Sandra!
LostPatriot
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.
neverlate
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?
cvillekid
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?
kdj-kdj
I really like Taibbi.
barrett
It's an "institutional" thing. Never mind that the institutions are collapsing. They'll keep milking the system til the "beast" is dead.
maryfrost2
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.
when-the-whip-comes-down
maryfrost2:
If you read the proposed restrictions you will certainly find that was another case of the fox watching the hen house.
when-the-whip-comes-down
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
when-the-whip-comes-down
make the link work by ditching the space in goldman... sorry
laughorcryagain
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.
kdj-kdj
You are a genius.
I'm clapping for you... really!
WestVillager
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.
maryfrost2
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.
maryfrost2
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.
amapola101
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.
when-the-whip-comes-down
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.
slmpirate
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?
barrett
They did the same thing with oil last year when prices were $145 a barrel.
neverlate
You have to ask yourself why is the Democratic Congress not conducting a detailed investigation of the events leading up to this mess?
kdj-kdj
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.'
cvillekid
kdj: exactly.
maryfrost2
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.
when-the-whip-comes-down
To make a partisan play about anything in our government is to allow the guilty to distract us from the real crimes.
rvnmaniak
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.
kdj-kdj
People are?
LostPatriot
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"?
Mauiboy
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.
maryfrost2
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.
SandraZ8122
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
maryfrost2
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.
maryfrost2
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.
laughorcryagain
dodd and barney should be all over this
give it time
neverlate
you have to be joking
WestVillager
Should be or will be?
maryfrost2
You all need to know the part that Chris Dodd and Barney Frank played in the housing collapse. They should be in jail.
winston1
Dodd and Barney caused it.
rvnmaniak
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.
nortonclybourn
Yeh yeh, ACORN caused the housing crash. Thanks for that penetrating analysis.
Georealist
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???
maryfrost2
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.
GPatton
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
barrett
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.
LostPatriot
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.
maryfrost2
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.
NewyorkerR
WOW... did you run out of Kool aid?
when-the-whip-comes-down
What's to counter... I think LostPatriot is pretty observant.
maryfrost2
No one cared about TRUTH when making these home loans--AND I MEAN NOONE.
amapola101
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.
kscr14
I think we should all just walk away from our mortgage.Oh... and the home equity.
SandraZ8122
kscr14? what equity? it's all gone
kscr14
I meant the home equity loan.
amapola101
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
DeliaK
..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.
pricklypear
And our government did NOTHING. Thanks, Government.
kdj-kdj
Yeah... the last 30 years has been a black hole for Presidents and politicians in general.
maryfrost2
Our government is not going to do one thing to GOLDMAN SACHS, unless it is to bail them out again if they need it.
LostPatriot
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.
NewyorkerR
Lostpatiot... wow .. you my friend need some help
when-the-whip-comes-down
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
lsg280
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.
cvillekid
One problem, lsg280. They already own us.
Cymatic
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.
when-the-whip-comes-down
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
SandraZ8122
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
cvillekid
Land of surfdom! I'm listening to Pet Sounds as we speak! ¡Qué casualidad!
speakingout101
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.
kdj-kdj
"""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?
Georealist
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.
winston1
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.
cvillekid
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.
kdj-kdj
I thought he was running for President of New York City... ?
Hotfrostins
Its quite obvious that a trap was baited, set and to their benefit sprung.
Georealist
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.
AlanD2
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.
when-the-whip-comes-down
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.
kdj-kdj
What do you think unemployment would be right now? 25%? 35%? Higher?
SandraZ8122
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
neverlate
That's an insult to French whores
when-the-whip-comes-down
You would get a kick out of watching Max Keiser:
http://maxkeiser.com
Thank you.
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