Senate report to reveal mortgage crisis details: WSJ

Yahoo ^ | 4/3/11 | AFP

[Toddsterpatriot]

"..Goldman, the Journal reported, created CDOs in 2006 and 2007 to shield its exposure to the US housing market, and has been accused of making large bets against the market while selling bullish positions to group that were not expecting the market to fall..."

These people need to be in jail or worse. They are big time crooks and knew what they were doing.

Could you explain what they were doing and why it deserves jail time?

[Anti-Bubba182]

They committed fraud. They privately bet the market would go down while selling the opposite position and made a fortune at the expense of clients.

Banks Bundled Bad Debt, Bet Against It and Won

[khnyny]

I’m sure you know this, or you wouldn’t be asking the poster that faux question, but very few people in the world understand and can explain the complexities of the derivatives market and how they were used by GS (Goldman Sachs) and others. That was the beauty of it - our own Government watchdogs didn’t even come close to understanding what the hell was going on.

[Toddsterpatriot]

They committed fraud.

Fraud? You must have a new definition of the word.

They privately bet the market would go down while selling the opposite position

Do you what a synthetic CDO is? How it is created?

Banks Bundled Bad Debt

I'm not sure about other banks, but from what I've read about Goldman, there was no bad debt involved. No debt involved at all.

[Toddsterpatriot]

I’m sure you know this, or you wouldn’t be asking the poster that faux question

It's not a faux question, fraud is a serious accusation.

very few people in the world understand and can explain the complexities of the derivatives market

I have a feeling the huge financial firms that bought these synthetic CDOs (they weren't sold to little investors) have a pretty good grasp on derivatives.

[khnyny]

Goldman itself was the object of an April 2010 SEC suit, alleging that it had committed fraud when it sold investors a mortgage security without disclosing that bearish hedge fund Paulson & Co. helped pick the loans. Goldman paid a record $550 million fine and acknowledged that its marketing materials contained incomplete information.

Imho, this is just the beginning.

[WashingtonSource]

Fannie and Freddie execs over the period from 1998 to 2011 probably made closer to $1 billion. $240 million was paid from 1998 to 2003 alone.

[Anti-Bubba182]

From the link I posted:

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,” said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. “When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

This is the essence of what they were doing.

[khnyny]

Here’s a book that give’s a good layman’s partial overview of what transpired in the financial meltdown:

Business Ethics: Ethical Decision Making and Cases
By O. C. Ferrell, John Fraedrich, Linda Ferrell

[Toddsterpatriot]

it had committed fraud when it sold investors a mortgage security without disclosing that bearish hedge fund Paulson & Co. helped pick the loans.

Here are the 30 loans included in this synthetic CDO. Would you like to buy it?

I don't see any fraud there, do you?

And just so you know, when a firm stands between 2 clients, it's against the rules to tell either client about the other.

Imho, this is just the beginning.

I'm sure. When idiot Congressmen can whine about things they don't understand and get the public to go along with them, they can drive firms out of business.

[khnyny]

Lol, you are certainly entitled to your opinions! :)

[khnyny]

Oh, and one more thing, pertaining to this specific case, GS has so many attorneys in-house and on retainer that if they thought they were innocent they would have fought tooth and nail instead of settling and shelling out $550 million....if you settle a case you don't get docs subpoenaed and have executives under oath, etc., etc. Disclosure is a bitch.

[Toddsterpatriot]

The simultaneous selling of securities to customers and shorting them because they believed they were going to default

Do you understand what a synthetic CDO is or not?

Have you ever bet on a baseball or football game?

“When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

When you create a security and sell it, you prove Sylvain is talking out of his ass. Goldman didn't commit arson or cause the mortgages to default.

[Toddsterpatriot]

Since it's clear you don't understand synthetic CDOs, you're entitled to your ignorance.

[Tzimisce]

Oh, this should be good!

How many coats of white wash are on this report?

[khnyny]

http://www.bvonmoney.com/2010/07/16/goldman-sachs-550-million-fine-subprime-mortgages/

Interesting reading.

[RayChuang88]

Is there ANYTHING that Goldman Sachs done in its history that hasn't ended up causing a major financial crisis?

If you've read up on the history of Goldman Sachs, that company was heavily involved in the margin trading that caused the 1929 stock market crash, got involved in complicated credit default swap scheme to get Greece into the Eurozone, and essentially pulled the plug on Lehman Brothers that caused the 2008 stock market crash, among other things!

[r9etb]

Hopefully you’re off the rag tomorrow. It’s a work day.

So you're asking me to add "juvenile and silly" to pissy and self-righteous.... check.

[AndyJackson]

Where did you find this list?

Open Secrets: Top Contributors to the Obama campaign

Believe me, you have no idea how or why I so astonished at this data. The only explanation I can figure out is that the New Deal was so good for these educational institutions last time around that taking another toss for the cupie doll seemed just the right thing to do.

[Anti-Bubba182]

Goldman thought and bet the mortgages would default while continuing to sell “bullish positions” to their clients the knew would likely crater. As the market crashes they make money because of the short position. The higher the price is when they start and the lower it crashes the better.