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December 13, 2007
How Goldman Won Big on the Mortgage Meltdown
Must read from tomorrow's WSJ:
How Goldman Won Big on the Mortgage Meltdown
...The group's big bet that securities backed by risky home loans would fall in value generated nearly $4 billion of profits during the year ended Nov. 30, according to people familiar with the firm's finances. Those gains erased $1.5 billion to $2 billion of mortgage-related losses elsewhere in the firm. On Tuesday, despite a terrible November and some of the worst market conditions in decades, Goldman is expected to report record net annual income of more than $11 billion.
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To hedge is one thing, to make a large bet that the very securities you are packaging and selling will decline smacks of fraud. What would you think if you had purchased a ABS from Goldman that is now worth maybe 60 cents on the dollar?
I read between the lines of that article here.
Hey David -- Math error and all, very nice dissection of the story behind the story. I have no doubt that you have it just about right.
Hank Paulson headed Goldman at the time it was doing some hanky-panky with this stuff. Shouldn't somebody be asking him some questions?