Lisa Simpson
Jun 21,2010
In: Foreclosure

Admitting to Betting Against the Nation

The top brass of Goldman Sachs admitted before everybody – the Congress and the listening world that they had betted against USA. They generated financial tools that was to them manure to enable them and their customers to place mega bets on housing and mortgages.

The winners raked in hefty profits although the financial system of the country was taken to the edge of the precipice. The next generation has been handed down a burden of debt running into astronomical proportions.

Michael Lewis in his recent best selling book, The Big Short, recounts tales of many others who made the same type of bets against sub-prime mortgages and the like. The smart investors who had the vantage of being insiders could forecast the end and they did predict en masse foreclosures across USA, the dreams turning into nightmares and businesses going bust. They saw with their own eyes the vanishing of life time savings and the debut of an age of staggering unemployment. They were well aware that the country was facing a final war unto death and yet they betted in the casinos of Wall Street. These bets were mega ones that got paid ironically when the index of misery was at its height and the financial tools went around with the begging bowl to be bailed out so as to save the financial system.

This was the side of capitalism that is unacceptable. Those in power who were supposed to generate capital to fuel the economy of the country were instead inventing financial tools that would lead to mass destruction. Dubitable mortgages were given AAA ratings because the agencies were paid by the financial houses to do so. The whole scenario was simply a rigged show par excellence.

The regulating agencies all went to sleep or were outwitted by smart Wall Street operators. Meanwhile the hard working law-respecting Americans down the street were without defenses.

One of the most affected groups was the house builders. It was recently forecasted that nearly 80% or even 90% of those whose business was to build private houses had downed shutters or are still doing so prior to the coming of recovery. The tangible recovery continues to remain elusive. For this group it has been a mystery why the banks could not make ‘workouts’ during the recession. Previously whenever such a downturn took place the parties involved – the borrowers and the lenders would sit face to face and resolve the issue. But this time the lenders just exited. It is no longer cooperation and understanding but arrogance accompanied by litigation.

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