Greg Norton interviewed on the Real News Network (Video)
NEW YORK — Inside the thick Goldman Sachs investment circular were the details of a secret, $2 billion deal channeled through a Caribbean tax haven.
One bond analyst who reviewed the 2006 Cayman deal dismissed it in a report to clients as “a not so cleverly disguised way for Goldman Sachs & Co. to unload its unwanted exposures to the subprime real estate market onto foreign investors.”
Goldman spokesman Michael DuVally said that the firm “sold mortgage securities only to sophisticated investors” and disclosed “all the appropriate information available.”
McClatchy also found at least two instances in which Goldman appeared to mislead investors. In one, the firm said that $65.3 million in securities were backed by safe “prime” mortgages when the same loans had been labeled a cut below prime in a U.S. offering. In the other, Goldman listed $10 million as “midprime” loans when the underlying mortgages had been made to subprime borrowers with shaky finances.
The 2006 Cayman deal was part of a flurry of Goldman activity in the hidden, unregulated parts of the securities industry. Goldman’s traders also made huge bets that those securities would lose value by buying insurance-like contracts, called credit-default swaps, with private parties. Beginning early in 2007, they bought swaps on a London-based exchange.
More on this story from McClatchy Newspapers
- Story | How Goldman secretly bet on the U.S. housing crash
- Story | Goldman takes on new role: taking away people’s homes
- Story | Mystery: Why did Goldman stop scrutinizing loans it bought?
- Story | Mortgage crisis shows why financial regulation is needed
- Story | Moody’s becomes latest to downgrade California bonds
- Graphic | Profile of Cayman Islands
- Video | Goldman Sachs’ secret bets
- Video | One couple stands up to Goldman Sachs
- Video | McClatchy’s Goldman Sachs probe
- Video | Goldman’s changing role in subprime mortgages
- On the Web | State-by-state data on troubled mortgages
- On the Web | See our complete Goldman report