Wall Street shafted the World.

Goldman left foreign investors holding the subprime bag. –

… The Sept. 26, 2006, document offered sophisticated U.S. and European investors an opportunity to buy into a pool of supposedly high-grade bonds backed by residential, commercial and student loans. The transaction was registered through a shell company in the Cayman Islands.

Few of the potential investors knew it, but the ratings of many of the mortgage securities hid their true risks and, in some cases, Goldman’s descriptions exaggerated their quality.

The Cayman offering — one of perhaps dozens made through the British territory — occurred as Goldman began to ditch the subprime mortgage business before the U.S. housing market collapsed under an avalanche of homeowner defaults.

In all, Goldman sold more than $57 billion in risky mortgage-backed securities during a 14-month period in 2006 and 2007, including nearly $39 billion issued from mortgages it purchased. Meanwhile, the firm peddled billions of dollars in complex deals, many of them tied to subprime mortgages, in the Caymans and other offshore locations.

Many of those securities later soured, but the sales allowed Goldman to become the only major U.S. investment bank to escape the brunt of the subprime meltdown. ….

Germany’s Deutsche Bank, the trustee holding mortgages for scores of Goldman’s bond offerings, also lists more than 50 private Goldman deals on its Web site. Of those, 42 were backed by risky mortgages. …

Goldman and other Wall Street firms have long used the Caymans as a gateway to European investors, said an official of a German bank …

Goldman and other Wall Street dealers were paying the biggest U.S. financial ratings firms for grading the risky bonds. …

Germany’s IKB Deutsche Industriebank, whose 2007 near-collapse from subprime losses awakened Europe to the impending financial crisis, has written off about $19 billion (in current U.S. dollars) related to U.S. mortgages. …

 

http://www.mcclatchydc.com/227/story/77844.htmlIncluding Video (Snips)

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One Response to “Wall Street shafted the World.”

  1. worzzz Says:

    Wall street Fraud:

    …. the world knows that the collapse of the financial system had, at its core, the largest financial fraud of all time. That fraud was in the origination, the rating, the underwriting and the issuance of credit default swaps against sub-prime mortgages issued largely by private originators and securitized by the largest banks.

    The FBI knew this in 2004, when it warned in public of an “epidemic of mortgage fraud.” When Fitch Ratings in 2007 undertook a small sample survey of “high CLTV, stated documentation loans” here’s what they found: “The result of the analysis was disconcerting at best, as there was the appearance of fraud or misrepresentation in almost every file.” But Mr. Greenspan will not say the word aloud. …

    http://www.huffingtonpost.com/james-k-galbraith/oh-please_b_513372.html

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