In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, 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.
Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.
Okay, a few comments. It’s ordinarily considered fraud to make representations you know to be untrue. In this case, it seems to me that it would be fraud to make representations you suspect to be untrue, because the AAA rating implies that you have no such suspicions. Someone should go to jail.
Kudos, by the way, to McClatchey, which once again proves itself the best journalistic entity in the country, for investigating this situation.
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