Goldman's offshore deals deepened global financial crisis

[deminks]

http://www.mcclatchydc.com/227/story/81465.html?storylink=omni_popular

NEW YORK — When financial titan Goldman Sachs joined some of its Wall Street rivals in late 2005 in secretly packaging a new breed of offshore securities, it gave prospective investors little hint that many of the deals were so risky that they could end up losing hundreds of millions of dollars on them.

McClatchy has obtained previously undisclosed documents that provide a closer look at the shadowy $1.3 trillion market since 2002 for complex offshore deals, which Chicago financial consultant and frequent Goldman critic Janet Tavakoli said at times met "every definition of a Ponzi scheme."

The documents include the offering circulars for 40 of Goldman's estimated 148 deals in the Cayman Islands over a seven-year period, including a dozen of its more exotic transactions tied to mortgages and consumer loans that it marketed in 2006 and 2007, at the crest of the booming market for subprime mortgages to marginally qualified borrowers.

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.

(snip)

Tavakoli, an expert in these types of securities, said it's time to start discussing "massive fraud in the financial markets" that she said stemmed from these offshore deals.

"I'm talking about hundreds of billions of dollars in securitizations," she said, without singling out Goldman or any other dealer. " . . . We nearly destroyed the global financial markets."

HEADS, I WIN; TAILS, YOU LOSE

Goldman's activities in the Caymans helped it unload some of its subprime-related risks on others and also amass tens of billions of dollars in protection against a U.S. housing crash that ultimately occurred. These deals have accounted for a sizeable share of the firm's $103 billion in revenues and more than $25 billion in profits since Jan. 1, 2007. At the end of 2009, Goldman had set aside more than $16 billion in cash and stock bonuses for its employees.

(end snip)

I did not see this posted yet, though it is from last Wednesday. A very important article that is a must read, IMHO.

[earthboundmisfit]

1. Smacks of treason, doesn't it?

At the very least approaches it. They knew what they were doing could - and would - damage the country...

[Octafish]

2. Goldmine Sacked

Gee. The Pupetteer must be so proud.