Have you ever seen me write anything good about Paulson? No, you haven't.
And while Goldman Sachs' conduct may have been unethical, it was not illegal. There's a distinct difference and that's why prosecutions are next to impossible. Even if they had been involved in illegal activity, where do you assemble twelve Americans who can all understand how bonds are rated, what credit default swaps even are, and how the government agencies backing these crap bonds were staking their reputation and the taxpayers' dollars that they weren't crap at all? Look what happened at the unsuccessful prosecution of the two Merrill Lynch traders.
Good God, man - you have a PhD and think that shareholders of a corporation incur no risk when they invest! What does that say about the prospects of assembling an intelligent jury from twelve people off the street? Read some of these posts - do you want their authors sitting in judgment on a case involving stripped interest derivatives or the spreads on CDSs.
Goldman Sachs is guilty of simply trying to hedge their own exposure when they awoke TOO LATE to the fact that it was all coming crashing down. If you read "The Big Short" you know that a lot of people awoke to the smoke and shattering mirrors much earlier. Hell, even I saw the cracks appearing and dumped almost all my financial stocks before I got hurt too badly.
Should GS and the others have dropped out of selling MBS when they saw what was coming? Yes. COULD they have dropped out? Highly doubtful. The home loan business would have slammed shut like a vault door. We would have seen exactly what we DID see, only with a lot more panic thrown in. Read the transcripts of the Fannie Mae and Freddie Mac hearings earlier and tell me what the reaction of people like Fwank, Dodd, and Paulson would have been if they had dared rear up to the giant and said, "We're not selling this junk any more." Tell me what would have happened to GS if they suddenly presented a roadblock and possible chink in the armor of the federal mortgage giants? What would the governmnet have told them? (What did the governmnet tell the banks that didn't need TARP? What did the governmnet tell Oppenheimer when they said no to the terms of the Chrysler bankrutcy?)
I have no idea who you are, have no idea what you do, have no idea if you're an honest businessman or a thief. But if someone else is guaranteeing your loan, I'd lend you $1000 sight unseen. That's the exact circumstance banks found themselves in and they did get sloppy, from little community S&Ls like Cooperative up to giants like Citigroup. The money was flowing like wine and Uncle Sam was covering all bets.
Ultimate blame lies on the doorstep of Washington, who kept guaranteeing far too many loans of dubious quality that they were completely aware of.
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