Goldman sold CDO assets to short them…
If true, this piece in today’s NY Times is both staggering and depressing. It seems that ex-Goldman employees are starting to talk about all that went on from 2006-2008 in the selling of collateralized debt obligations – and Goldman’s subsequent profits from shorting the very products it sold. Whether or not it turns out to have been illegal, it smells very bad.
The piece suggests Goldman created securities knowing they were going to plummet in value. Sold them aggressively. And then bet against them, leaving the holders of these collateralized bonds to suffer. This then contributed to the freezing of the credit markets and everything else we’ve seen since 2007.
Of course, it’s not all Goldman’s fault. Morgan Stanley, Deutsche Bank et al. were all doing the same thing. But if I were an executive at any of these firms today, I’d be seriously worried about men with handcuffs and arrest warrants walking onto my trading floor in the coming months.