Calculated Risk has a 1 November 2009 post about Vampire Squid's (VS) bets on the US housing crash and how it sold clients mortgage-backed securities while expecting they would fall in value. Here's a link: http://www.calculatedriskblog.com/2009/11/report-on-goldmans-bets-on-housing.html. Is anyone surprised VS stuck its blood funnel into its own clients? Here are some of my VS posts relevant to its conduct, 16 December 2007, 22 February 2009 and 29 May 2009:
http://skepticaltexascpa.blogspot.com/2007/12/goldman-sacks-its-clients.html.
http://skepticaltexascpa.blogspot.com/2009/02/fire-lloyd-blankfein.html.
http://skepticaltexascpa.blogspot.com/2009/05/goldman-sacks-its-clients-2.html.
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Goldman Sachs Group Inc., one of the top five U.S. municipal bond underwriters, is angering politicians and public-finance officials in New Jersey, Wisconsin, California and Florida by recommending that investors purchase credit-default swaps to bet against 11 states’ debt.
In the three months since the New York-based securities firm recommended “shorting municipal credit,” the value of the Markit MCDX index of the derivatives’ price more than tripled, to as high as 278.33 basis points from 87.75. A basis point on a credit-default swap protecting $10 million of debt for five years is equivalent to $1,000 annually.
Bets against public debt, once unheard of on bonds considered safe enough for retirees, have soared as the National Conference of State Legislatures projects recession-fueled budget crises will cause $97 billion of shortfalls nationwide over the next 18 to 24 months.
It’s “disturbing” to advise investors to bet against the financial health of a state whose bonds Goldman helps sell, Assemblyman Gary S. Schaer, a Democrat who chairs the Financial Institutions and Insurance Committee, said last week in a letter to Chief Executive Officer Lloyd C. Blankfein.
It takes a lot to feed the vampire squid... credit default swaps, munis, equities, treasuries... frontrunning their clients.
Buffett was a long time Moody's holder as they engaged in practices that helped destroy our nation. Ditto Goldman. Sad. Terribly sad.
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