It Can't Already Happened Here

Goldman-Sachs May Have Sold Very Bad Paper.
Gosh; What A _______ Surprise.



According to the McClatchy newspapers, in the period 2005-2007, Goldman-Sachs (VAMPSQD) knew it had invested heavily in the now-infamous Derivatives -- which it sold to wealthy clients (which included other investment houses, pension funds, wealthy consortiums, etc).

What wasn't known until now is that Goldman-Sachs knew the Derivative market was very likely to implode, and pushed them to clients anyway, as solid investments, knowing that in truth the risk was higher than with any other kind of investment vehicle:

When financial titan Goldman Sachs joined some of its Wall Street rivals in late 2005 in secretly packaging a new breed of offshore securities, it gave prospective investors little hint that many of the deals were so risky that they could end up losing hundreds of millions of dollars on them.

McClatchy has obtained previously undisclosed documents that provide a closer look at the shadowy $1.3 trillion market since 2002 for complex offshore deals, which Chicago financial consultant and frequent Goldman critic Janet Tavakoli said at times met “every definition of a Ponzi scheme.”

The documents include the offering circulars for 40 of Goldman’s estimated 148 deals in the Cayman Islands over a seven-year period, including a dozen of its more exotic transactions tied to mortgages and consumer loans that it marketed in 2006 and 2007, at the crest of the booming market for subprime mortgages to marginally qualified borrowers.

In some of these transactions, investors not only bought shaky securities backed by residential mortgages, but also took on the role of insurers by agreeing to pay Goldman and others massive sums if risky home loans nose-dived in value — as Goldman was effectively betting they would.

You have to marvel at the arrogance, the cynical manipulation, the greed behind this kind of thing. As Ritholz' The Big Picture site noted, "... the implication ...is not that these were possible losses, but rather, based upon what GS understood about the ways these papers were structured and then hedged (insured with the client), it was a sure loss. So rather than hold on to the money losing mortgage based securities, GS devised a way to sell it to clients!"

But; hey!! Doncha love it?? "[investors were] agreeing to pay Goldman and others massive sums if risky home loans nose-dived in value". Little Lloyd Blankfein's outfit was making money coming and going! They were all over it! They were Masters Of The Universe !!!!

And, they're still doing business. And our government is loaded with current former G-S Employees in key positions at SEC, the Fed... courtesy of Our President, who appointed them.

Has anyone said the United States is "Too Big To Fail"?

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