I know from my personal experience doing business with other market makers and managing market-making trading operations for natural gas, oil, electricity, credit derivatives and metals how these businesses operate and how they are perceived by their trading counterparties.
Hopefully Goldman Sachs does not settle with the SEC. This has all been grandstanding by the SEC and these Senators and if it goes to trial no reasonable jury should convict Goldman.
There were many contributors to the US housing bubble, the least of which was Goldman Sachs market- making function in synthetic collateralized debt obligations. Here were the real causes of the housing bubble:
1) The public and our politicians thought that housing prices would go up forever and that one could never lose by buying a house.
2) The FHA and our politicians pushed our banks to make riskier loans to families that could not afford to make the monthly payments and were literally putting no money down and risking with the house (US taxpayer) money.
3) The banking regulators allowed the practice of “liar loans” to prevail whereby the borrowers frequently lied about their income.
4) The rating agencies did a horrible job of recognizing the changing housing market because most of their models were based on historical trends and missed some of the changing fundamentals.
5) Our government kept adding subsidies for home ownership and ran out of ways they could pay people to buy homes.
6) The number of homes per family and the average size of the homes built per family kept going up to unsustainable levels. Plus all this extra room gave plenty of space for people to move into once prices started going down and it was obvious that homeownership had its risks.
Today’s hearings were a waste. Let’s ask the Senate to do less because when they are trying to protect us they put us at greater danger.
No comments:
Post a Comment