Discussion
chimster said:
Have they misbehaved or is this just normal banking practise and all banks are at it , but Goldman were unlucky to get caught? Acceptable or not?
It's normal, but there's a lot more to it than is reported in the media. Also add in the context, which is that the SEC (one of the various US regulators) have been widely accused of doing bugger all before and during the crisis, and are now scrabbling to regain some credibility.Simply (apologies to the pedants for over-simplification)
Clients A and B are professional investors. They should know what they're doing without hand holding. Client A wants to invest in mortgage-backed securities, in effect betting they will rise. Client B wants to do the opposite, betting they will fall. Goldman as intermediary constructs a product that will match the seller and buyer. This is normal - someone has to take the other side of the trade. The seller had an input into the credits that went into the product. Presumably so did the buyer. The buyer loses a lot of money, and blames it on everyone but themselves.
Now, these are not simple products and Goldman ended up with some risk themselves, and lost money early into the crisis. So they hedged themselves to eliminate this risk, by selling the ABX index (I think) in other words effectively betting against house prices. Apparently this makes them evil. If they hadn't done this, and lost billions and gone bust or had to be bailed out, people would be calling them evil and asking why they had all this risk.
It has yet to be proven that they did anything illegal or immoral, but the SEC and the US government, wanting to be seen to be doing something, need a scapegoat and are doing a good job of turning public opinion against Goldman - one of the few banks that didn't need any taxpayer money precisely because they offset their risks.
munky said:
chimster said:
Have they misbehaved or is this just normal banking practise and all banks are at it , but Goldman were unlucky to get caught? Acceptable or not?
It's normal, but there's a lot more to it than is reported in the media. Also add in the context, which is that the SEC (one of the various US regulators) have been widely accused of doing bugger all before and during the crisis, and are now scrabbling to regain some credibility.Simply (apologies to the pedants for over-simplification)
Clients A and B are professional investors. They should know what they're doing without hand holding. Client A wants to invest in mortgage-backed securities, in effect betting they will rise. Client B wants to do the opposite, betting they will fall. Goldman as intermediary constructs a product that will match the seller and buyer. This is normal - someone has to take the other side of the trade. The seller had an input into the credits that went into the product. Presumably so did the buyer. The buyer loses a lot of money, and blames it on everyone but themselves.
Now, these are not simple products and Goldman ended up with some risk themselves, and lost money early into the crisis. So they hedged themselves to eliminate this risk, by selling the ABX index (I think) in other words effectively betting against house prices. Apparently this makes them evil. If they hadn't done this, and lost billions and gone bust or had to be bailed out, people would be calling them evil and asking why they had all this risk.
It has yet to be proven that they did anything illegal or immoral, but the SEC and the US government, wanting to be seen to be doing something, need a scapegoat and are doing a good job of turning public opinion against Goldman - one of the few banks that didn't need any taxpayer money precisely because they offset their risks.
ln1234 said:
munky said:
chimster said:
Have they misbehaved or is this just normal banking practise and all banks are at it , but Goldman were unlucky to get caught? Acceptable or not?
It's normal, but there's a lot more to it than is reported in the media. Also add in the context, which is that the SEC (one of the various US regulators) have been widely accused of doing bugger all before and during the crisis, and are now scrabbling to regain some credibility.Simply (apologies to the pedants for over-simplification)
Clients A and B are professional investors. They should know what they're doing without hand holding. Client A wants to invest in mortgage-backed securities, in effect betting they will rise. Client B wants to do the opposite, betting they will fall. Goldman as intermediary constructs a product that will match the seller and buyer. This is normal - someone has to take the other side of the trade. The seller had an input into the credits that went into the product. Presumably so did the buyer. The buyer loses a lot of money, and blames it on everyone but themselves.
Now, these are not simple products and Goldman ended up with some risk themselves, and lost money early into the crisis. So they hedged themselves to eliminate this risk, by selling the ABX index (I think) in other words effectively betting against house prices. Apparently this makes them evil. If they hadn't done this, and lost billions and gone bust or had to be bailed out, people would be calling them evil and asking why they had all this risk.
It has yet to be proven that they did anything illegal or immoral, but the SEC and the US government, wanting to be seen to be doing something, need a scapegoat and are doing a good job of turning public opinion against Goldman - one of the few banks that didn't need any taxpayer money precisely because they offset their risks.
just what munky said, SEC have been made to look utterly incompetent by madof/stanford etc.. this has been in the works for 9 months and its announced now? pathetic populist politics designed to smooth pasage of new financial regulation. these are professional investors betting on which home loans default or not, they arn't even investing in the underlying mortgages, its a side bet ffs!!! they should be going after the subprime lenders themselves but they won't becasue they are desperate for a 'big' score.
fbrs said:
just what munky said, SEC have been made to look utterly incompetent by madof/stanford etc.. this has been in the works for 9 months and its announced now? pathetic populist politics designed to smooth pasage of new financial regulation. these are professional investors betting on which home loans default or not, they arn't even investing in the underlying mortgages, its a side bet ffs!!! they should be going after the subprime lenders themselves but they won't becasue they are desperate for a 'big' score.
You're better advised not to launch a legal attack against an entity which cannot afford to make a payout, rather than one which cannot afford not to settle.fbrs said:
just what munky said, SEC have been made to look utterly incompetent by madof/stanford etc.. this has been in the works for 9 months and its announced now? pathetic populist politics designed to smooth pasage of new financial regulation. these are professional investors betting on which home loans default or not, they arn't even investing in the underlying mortgages, its a side bet ffs!!! they should be going after the subprime lenders themselves but they won't becasue they are desperate for a 'big' score.
Weren't these "subprime" securities rated AAA by the rating agencies based on what banks, that were doing the securitisation, were telling them?IMO - these banks were mis-selling junk. Part of the blame lies with greedy fund managers - definitely! However some must also lie with the banks.
Edited by Murcielago_Boy on Tuesday 27th April 16:40
anonymous said:
[redacted]
On the TARP money there was a big fuss about it at the time - GS initially refused it (they didn't make any big losses, after all) but were heavily leaned on to accept it, to avoid stigmatising those that had to take it. They didn't need it, they were forced to accept it - and they paid it back in the shortest timeframe allowed.just found this on google: http://www.businessinsider.com/uncovered-tarp-docs...
anonymous said:
[redacted]
Understood.Blankfein called his mate Paulson and said:
B: "hello mate -you're going to sort out our $10bn via AIG right?"
P: "yeah"
B: "nice one mate - I'll short their stock - wont anyone notice?.
P: "No - everyone needs AIG - ref shorting their stock, yeah do it - I've got $1bn in GS stock still which I'll need when i'm not working in the treasury so we could do with GS making back some money.
Tonker - the WHOLE THING STINKS.
At the end of the day, my businesses aren't supported by strategy underpinned by government money and cronyism.
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