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Haven't you kept up with the sub prime crisis? GS rated junk mortgage bonds with the highest rating AAA, and then bet heavily that the same bonds would sink. Wh
by recoiledsnake 14y ago
Haven't you kept up with the sub prime crisis? GS rated junk mortgage bonds with the highest rating AAA, and then bet heavily that the same bonds would sink. When they sank, they made windfall profits. This came out in investigations and they were given a slap on the wrist later by the government.
http://www.examiner.com/article/goldman-sachs-sold-sub-prime-junk-as-no-risk-aaa-then-gambled-for-prices-to-tank http://www.examiner.com/article/goldman-sachs-sold-sub-prime...
"As a result, Goldman made an approximate $4bn profit from betting on the sub-prime collapse, more than off-setting its own mortgage losses and ensuring that 2007 was a bumper year for the bank while all around are counting their losses."
They basically threw their clients like AIG(which was a massive failure requiring a huge bailout) under the bus for their own profits.
- legutierr 14y agoI think you read me wrong. I'm wondering why if they bet against their clients anyone would do business with them at all anymore.
- mayneack 14y agoLack of incentives for long term success? Too big to fail?
- mdda 14y agoA few things : (i) Goldman did not rate any bonds, the rating agencies did. (ii) For every buyer of a security there is a seller. Goldman's trading desk (likely) had a conflict of interest with their bankers. However, just selling something that goes down doesn't make someone evil (it's logically similar to buying a stock that later goes up). (iii) AIG failed due to its own inadequacies : They believed that they were the smartest people in the room, when (in retrospect) they were making a huge blunder.