GS had nothing to do with the actual homeloan mortgages, Did you read the linked article?
“As for Goldman, the subcommittee said, the firm “used net short positions to benefit from the downturn in the mortgage market.” It said Goldman designed, marketed, and sold CDOs in ways that created conflicts of interest with clients, while also at times providing the bank with profits “from the same products that caused substantial losses for its clients.”
GS marketed these mortgage-backed securities to various investing entities - like retirement and pension funds -who can only invest in the safest securities *by law.*. At the same time, GS was so certain that these CDOs were dogmeat that they *shorted* the same securities.
That way, GS profited hugely - as their clients suffered tremendously losses. It was not only a conflict of interest - since their profit could only come as their clients lost their money. It was also criminal.
The banks created these ARM and other strange new mortgages; these mortgages were *NOT* those guaranteed by Fannie and Freddie, but regular commercial mortgages. They pushed them *hard* on homeowners, assuring the homeowners that everything was great, while the banks and the mortgage companies then cheated to get the mortgages approved. GS used these mortgages as the basis for creating securities - which they then traded on the derivatives market for up to 600 times the amount of actual homes that were included in the package.
When the homeowners couldn’t continue the payments after the ARMs went up, or the bubble payment came due, the originators foreclosed and took the properties.
I will promise never to have a good thing to say about GS.
The Fed, US Treasury and GS have their weekly policy/planning meeting on how to best to play US taxpayers and individual investors as schmucks. Goldman gave mega $$$$ to Dems and put Obama into office, and if the truth was known probably pulls the strings of many on the right.
Until we have a country that is run for “WE THE PEOPLE” as enumerated in the US Constitution, and not for the international banks and corporations that view US sovereignty as a PITA (with the T meaning “their”), we’re on a slope that is downhill.
Which retirement and pension funds? Or is the writer imagining they were among the "various" buyers?
At the same time, GS was so certain that these CDOs were dogmeat that they *shorted* the same securities.
If GS created and sold the CDOs, how could they also short them?
It was not only a conflict of interest - since their profit could only come as their clients lost their money.
And their loss could only come as their clients made money.
It was also criminal.
That's funny. Do you have the text of the law you imagine they broke?
GS used these mortgages as the basis for creating securities
Yes, mortgages are the basis of some CDOs.
which they then traded on the derivatives market for up to 600 times the amount of actual homes that were included in the package.
Huh?