Wall Street: The Vampire Culture

No wonder popular culture in the US is filled with vampires. The place is run by vampires, especially the Wall Street vampires.

Here's the initial bit from an article by Greg Gordon in McClatchy Newspapers:

How Goldman secretly bet on the U.S. housing crash

In 2006 and 2007, Goldman Sachs Group 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.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman's failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws.

Those Wall Street leeches, vultures, and vampires are working all sides of the street: selling AAA-rated crap, giving themselves billion dollar bonuses, hitting up the American taxpayer for trillion dollar TARP funds, and buying themselves Congress for Christmas. It's the American Way!

Go read the whole article to relish the rapaciousness of American high finance.

Here's another way of putting it:

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen. When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.”

-Sylvain R. Raynes, structured finance expert at R & R Consulting

from a posting Should Investment Firms Bet Against Their Clients? on Barry Ritholtz's The Big Picture blog.