1) The allegations accuse Goldman of consorting with prominent hedge fund Paulson and Co. Inc. to devise risky sub-prime mortgages which were designed to fail.
2) Goldman then proceeded to vouchsafe these as "good investments", sold them on to other investors, and promised the support of the hedge fund's investments.
3) Now, here is the actual fraud. Goldman somehow "forgot" to tell these investors, or hid it away in some convoluted prospectus, that the hedge fund had actually helped to pick the WORST mortgages. Moreover, behind the curtains they were betting against these investments.
4) To add insult to injury, Goldman will be handing out about $5.5 billion in bonuses. WHY? They just gave $16 billion in January to cover bonuses and compensations for 2009. Seriously, if they have this much money to give out as bonuses I wouldn't mind a piece of that pie. Just let me know who I should forward my address to so I can receive my check.
5) As can be expected, the companies involved stood to make a lot of money. However, Goldman claims that they actually lost money and are using this as their defense. They say, that they lost around $90 million and are actually the victim and not the perpetrator of this crime.
As you can see,this is one heck of a mess. Andrew Ross Sorkin sums it up with an imaginative metaphor. He says that this trickery is the equivalent of "buying fire insurance on a neighbour's house and then committing arson."
If anything, this augments the argument for a modernization of the system. Things are getting out of hand. It's about time a policy of stringent regulations is introduced because in Goldman's world greed is clearly God. From here, it looks like President Obama will likely pass his ideas on financial reform in the coming weeks, despite the Republican threats of a filibuster. I look forward to it and will cover it in a future post.
If anything, this augments the argument for a modernization of the system. Things are getting out of hand. It's about time a policy of stringent regulations is introduced because in Goldman's world greed is clearly God. From here, it looks like President Obama will likely pass his ideas on financial reform in the coming weeks, despite the Republican threats of a filibuster. I look forward to it and will cover it in a future post.
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