Report Reveals Wall Street Knowingly Sold ‘Crap’ Deals: ‘This Is An Absolute Pig’

The Senate Permanent Subcommittee on Investigations released a scathing 650-page report yesterday detailing some glaring examples of Wall Street’s malfeasance leading up to the 2008 financial crisis. Two of the highest-profile culprits in the report are Goldman Sachs and Deutsche Bank, as emails from both institutions reveal that they were selling securities that they knew were toxic and then shorting those same securities to turn a profit.

For instance, one Deutcshe Bank trader, Greg Lippman, described the assets his bank was peddling as “crap” and “an absolute pig”:

– Email regarding GSAMP 06-NC2 M8, an RMBS security that contained New Century loans and was issued by Goldman Sachs: “[T]his is an absolute pig.” (12/8/2006)

– Email describing ABSHE 2006-HE1 M7, a subprime RMBS security issued by Asset Backed Securities Corporation Home Equity Loan Trust, as a “crap deal”; and describing ACE 2006 HE2 M7, a subprime RMBS securitization issued by ACE Securities Corp., as: “[D]eal is a pig!” (3/1/2007)

Goldman Sachs did the same thing (in less colorful language), going so far as to tell investors that it’s interests “were aligned” with their own, even as it was spending billions betting against the very securities that it was selling. In all, Goldman “generated net revenues of $3.7 billion” betting against securities.

Aspects of the Dodd-Frank financial reform law were “designed to address and reduce these conflicts.” The most important of these provisions is known as the Volcker Rule, which would limit the ability of large investment banks like Goldman Sachs to trade for their own account, outside of doing business for their customers. But these very provisions are under attack by Republicans in Congress.

In a hearing today, House Republicans are expected to push the Financial Stability Oversight Council — the new body tasked with monitoring systemic risk in the financial system — to water down the Volcker Rule. Sen. Orrin Hatch (R-UT) said earlier this week that he is concerned that trading restrictions, including the Volcker rule, will simply be “unduly burdensome regulations.” Over at ThinkProgress, Ian Millhiser goes over the potentially criminal aspects of Goldman’s actions.