Goldman Congressional Hearings

exactly, and it was already crystal clear 5 minutes into the hearing that it did not matter what GS had to say, this was a platform to make sure the world understands that democrats want to push forward with financial reform. A complete political charade nothing more. I just really wonder why they picked GS. They could have had a way easier time with UBS or BoA. Its weird you wanna fight with the strongest kid on the block when you can accomplish all you want by taking on a weaker one.

Quote from ASusilovic:

Nevertheless, it's very "unfortuante" to describe these securities in emails as "sh.tty"... :D That's what this hearing was all about : to make GoldMAN look sh.tty. :cool:
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Quote from trendlover:

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This is what I see. They make the loan to (bad credit) people. Ok, so this should show in the model (high risk) true? BUT they charge the bad credit people very high interest rate. This high interest rate is the calculation to cover default risk in the model. But really everyone know who care if the interest is high, this people can not pay in time. But it the "model" show the better rating (because of high interest rate) to poor people.
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Just take a stab at this.

Yes, they wrote mortgages to anyone who could breath, for the purpose of securitization this was only one part because it was the asset (the home) that had the value, also.

I think the models that backed up the ratings was the history of homes losing value as much as they did. of course this was flawed also as the apprasiers inflated the value of the house.

Prior, declining home prices correlated with periods of unemployement, we had high employement so they could build models that even if the homeowner defaulted the house market would remain stable because unemployement wasn't a problem.

Faulty assumptions and not enough historical housing sales data, they may have cared but not enough, just built models to make it work. The rating agencies had their own models but the IB's being the salesman they are sold the idea of their models to the rating agencies.
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If you had a interest rate reset on a mortgage, how likely will this affect the value of a home?

Does a margin call affect the value of a stock? Actually, does a margin call effect the value of the company?
 
Quote from asiaprop:

exactly, and it was already crystal clear 5 minutes into the hearing that it did not matter what GS had to say, this was a platform to make sure the world understands that democrats want to push forward with financial reform. A complete political charade nothing more. I just really wonder why they picked GS. They could have had a way easier time with UBS or BoA. Its weird you wanna fight with the strongest kid on the block when you can accomplish all you want by taking on a weaker one.
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Why is anyone obsessed with Goldman? Their Arrogance is monumnetal! They used to be less arrogant, the worst financial crisis in the world and these goofs are oblivious to their part. If your being objective you would have to at least acknowledge that issue.
The CEO hands out the bonuses what a couple weeks after the annoucements of record unemployment. Those employees are no more intelligent than anyone else on the street now they even look like boners and arrogant and someone on this board said they were intelligent. The 4 guys yesterday are frighteningly stupid or their lawyers told them to be evasive and stupid. What a strategy for a meeting with the US Congress.
 
Anyone notice commission trying to tie AIG bailout - 2.2B of tax payer funds paid to GS. Appears like they are making a conspiracy / aiding and abetting allegation. Response was clear that they had insurance and the Govt intervened and decided they did not want AIG to default.

Odd from a pure legal perspective that the Govt investigating is also a party to these and various other complex transactions.

As the Govt raises conflicts of interest... they need to look in the mirror as they themselves have dubious conflicts.
 
Nutmeg, to make many loans to bundle, then sell to the big investment bank, they have to find the people to take this loan.
And there is big demand for this bundles.
One of this loan (option ARM) is what the big investment bank put in the bundle to make the asset value higher.

Option ARM loan give people who buy the house (option)
Each month they can choose:
1. make small payment (but very little money from this payment go to the interest of the loan) So this money is add back to the loan balance. (THE LOAN GROW BIGGER in time, no smaller)

2. They can pay (interest only) This is higher than (1.small payment choice) but no money go to the principle, so the people really not paying the loan down.

3. They can pay the bigger payment (this will pay some principle, and some interest)


Ok, most people choose option1, because is low payment.
So this loan grow bigger and bigger by value. Why? Because the interest rate they do not pay go back to the principle again and again and again every month.
So the (value) of the loan is high in the bundle (but the asset/house) is not really worth this same price.
That is stupid.
 
So the (value) of the loan is high in the bundle (but the asset/house) is not really worth this same price.
That is stupid.
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Thanks, I missed that point.
 
Quote from asiaprop:

its credit enhancements that were used and other third party guarantees and various technical issues that ensured certain cash flows to be directed to higher rated tranches first before flowing into lower ones. Some blame that rating agencies were "bought" to issue AAA ratings but I think thats too easy an answer to this whole mess. No, rating agencies in my opinion have a larger fault in all this than the ibanks themselves because all the modeling assumptions were completely wrong.
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The "third party" guarantees (aka AIG) came if the security was rated AAA/Aaa by the ratings agencies. Hence the models were tweaked to look good for the ratings agencies, but it was an unspoken understanding that there was a lot of business & fees for both parties if the investment banks kept pumping out these deals.

Since you're obviously not privy to what went behind the scenes at the ratings agencies, let me tell you. Quite a few of the lower level employees that did the grunt work have raised concerns about the true nature of these CDOs and the models behind them, but the superiors instructed them to proceed forward with the "appropriate" ratings. When the sh*t hit the fan, the house had to be cleaned and guess who was left in their positions and who was fired?

This is very similar to what transpired during the late 1990s with Investment Banks pumping out dog sh*t IPOs because there were a ton of fees to be made.

It's not illegal, but it is a racket. Which was fine by me, until the bailouts started
 
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