Tag Archives: finance

McClatchy: “Investors could only lose in Goldman’s Caymans deals” (not to mention taxpayers)

When financial titan Goldman Sachs joined some of its Wall Street rivals in late 2005 in secretly packaging a new breed of offshore securities, it gave prospective investors little hint that many of the deals were so risky that they could end up losing hundreds of millions of dollars on them.

Goldman did very well as our economy collapsed including a $10 billion preferred stock investment from the U.S. Treasury in October 2008, as part of the Troubled Asset Relief Program (TARP).

Goldman’s activities in the Caymans helped it unload some of its subprime-related risks on others and also amass tens of billions of dollars in protection against a U.S. housing crash that ultimately occurred. These deals have accounted for a sizeable share of the firm’s $103 billion in revenues and more than $25 billion in profits since Jan. 1, 2007. At the end of 2009, Goldman had set aside more than $16 billion in cash and stock bonuses for its employees.

Not only were investors losing, we (US taxpayers) lost to as Goldman covered its bets:

Many of Goldman’s winning bets with other large U.S. banks raised the price tags of 2008’s government bailouts of Citigroup, Bank of America, Morgan Stanley and others by sums that no one has yet determined because the contracts are private, according to people familiar with some of the transactions.

Read the full story at mcclatchydc.com. Then go watch Boiler Room.

Thanks @dangillmor for the link.