Goldman Sachs Duped Investors, Investigation Finds
Posted on Dec 30, 2009
McClatchy reporters have been digging into the shady offshore dealings of Goldman Sachs and what they found in the records of the financial-meltdown villain is as maddening as you’d expect.
According to the investigation, “Goldman peddled more than $40 billion in U.S.-registered securities ... but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.”
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.
Some of the investors, including foreign banks and even Wall Street giant Merrill Lynch, may have been comforted by the high grades Wall Street ratings agencies had assigned to many of the securities. However, some of the buyers apparently agreed to insure Goldman well after the performance of many offshore deals weakened significantly beginning in June 2006.
Goldman said those investors were fully informed of the risks they were taking.
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