As CIT goes bankrupt and Treasury Secretary Geithner warns that the “damage caused by this crisis” will “take some time” to repair, a key Wall Street player has managed to weather the storm at the expense of an unwary, drenched public.
“All men are equal,” E.M. Forster wrote a century ago, “all men, that is to say, who possess umbrellas.” An old saying puts it more tartly: “The rain falls equally on the just and the unjust, but more on the just because the unjust have stolen their umbrellas.”
According to the McClatchy Newspapers, Goldman Sachs spent years cornering the umbrella market:
In 2006 and 2007, they “peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
“Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.
“Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.”