How Goldman Won Big on the Mortgage Meltdown

By Paul Kedrosky · December 13, 2007 · ·

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.

Related posts:

  1. China Has a Worse Mortgage Problem Than the U.S.
  2. A Disturbance in the Mortgage Force
  3. Commercial Mortgage-Backed Securities Going to Zero
  4. Realtime Mortgage Market Carnage, Foreclosure Hype, etc.
  5. Goldman Sachs’ Denial Problem: "Still Untrue"

Comments

  1. Brian says:
    December 14, 2007 at 6:22 am

    Hank Paulson headed Goldman at the time it was doing some hanky-panky with this stuff. Shouldn’t somebody be asking him some questions?

  2. larry says:
    December 14, 2007 at 6:56 am

    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?

  3. David Kane says:
    December 14, 2007 at 9:28 am

    I read between the lines of that article here.

  4. Paul Kedrosky says:
    December 14, 2007 at 8:14 pm

    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.