McClatchy Investigation Reveals That Goldman Sold Junk Bonds
In an explosive exposé, the newspaper company, McClatchy, reveals that Goldman Sachs colluded with financial rating agencies to pass off risky securitized mortgages as AAA-rated securities. According to McClatchy, these mortgage-backed securities consisted of subprime loans that were presented to foreign investors as being safe. These investments were junk bonds.
There’s one particularly revealing part of the McClatchy exposé:
In marketing exotic deals that typically include subprime mortgage-backed securities, Goldman and other Wall Street firms have long used the Caymans as a gateway to European investors, said an official of a German bank, who wasn’t authorized to speak publicly and declined to be identified.
The 2006 Cayman deal was outside the reach of U.S. tax laws and free of U.S. regulation. Goldman circulated the deal under the names of Cayman-based Altius III Funding Ltd., and a sister firm registered in Delaware, both created for the sole purpose of facilitating the transaction.
The offering drew a scornful reaction from the bond analyst who warned investment clients to stay away. The analyst’s report, a copy of which was obtained by McClatchy, described Goldman as “a single underwriter solely interested in pushing its dirty inventory onto unsuspecting and obviously gullible investors.” Read more about these junk bonds…
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