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at the risk of soliciting downticks, caveat emptor surely? It's not like the underlying instruments were not known. Edit: I can't believe Goldman really said -
by retube 17y ago
at the risk of soliciting downticks, caveat emptor surely? It's not like the underlying instruments were not known.
Edit: I can't believe Goldman really said - here's a basket of triple A's, when in fact they were junk. Expressing an opinion on whether they were likely to go up/down is a different matter. Of course a salesdesk is going to promote the investment in positive terms.
- olefoo 17y agoThat's why we have courts, in this case it seems pretty clear that Goldman Sachs did materially misrepresent the nature of the instrument they were selling to their customers and colluded with Paulson to engineer something that Paulson could bet against. Caveat Emptor is a fine thing and one should always be cautions when buying investment instruments,but outright fraud and deception through material omission strike at the credibility of the market itself.
- byrneseyeview 17y agoWas any of the fundamental data in their presentation incorrect? They listed all the bonds in the reference portfolio. Were some of the bonds themselves deceptive? If so, why would Goldman just step into the middle of the transaction, instead of shorting them? You're acting as if Goldman, by virtue of being lucratively evil, had predicted the whole subprime mess. But they lost money initially, made it back on hedges, then lost other money elsewhere. If they were as well-informed as they should have been to commit this crime, they would have made far more money in 2007-9.
- deleted 17y ago[deleted]
- jfager 17y agoGoldman stepped into the middle of the transaction because that's what they were paid (I think it was 15m?) to do. You're right that the buyer should have taken a closer look at the underlying mortgages themselves, but that's the other part of the story, that the ratings agencies that everyone trusted to do that work for them were either on the take, stupid, or both.
- jfager 17y agoYour incredulity aside, they absolutely did say that, or at least they convinced the ratings agencies to say that. That wasn't the lie, though - according to the (horribly broken) models, they were AAA (or whatever rating is in question). The lie was that the package of underlying mortgage bonds was selected solely and independently by a 3rd party who had an interest in putting together a quality instrument, when in fact Paulson played the major role in the selection.