Here's the meat of it:
"[Goldman Sachs mortgage chief] Sparks followed up that [December 14, 2006] meeting [about lowering Goldman's exposure to mortgage loans] with a seven-point memo laying out how to unload the bank's mortgages. Entry No. 2 is particularly noteworthy. 'Distribute as much as possible on bonds created from new loan securitizations,' Sparks wrote, 'and clean previous positions.' In other words, the bank needed to find suckers to buy as much of its risky inventory as possible. Goldman was like a car dealership that realized it had a whole lot full of cars with faulty brakes. Instead of announcing a recall, it surged ahead with a two-fold plan to make a fortune: first, by dumping the dangerous products on other people, and second, by taking out life insurance against the fools who bought the deadly cars.
"The day he received the Sparks memo, Viniar seconded the plan in a gleeful cheerleading e-mail. 'Let's be aggressive distributing things,' he wrote, 'because there will be very good opportunities as the markets [go] into what is likely to be even greater distress, and we want to be in a position to take advantage of them.' Translation: Let's find as many suckers as we can as fast as we can, because we'll only make more money as more and more shit hits the fan.
"By February 2007, two months after the Sparks memo, Goldman had gone from betting $6 billion on mortgages to betting $10 billion against them — a shift of $16 billion. Even CEO Lloyd 'I'm doing God's work' Blankfein wondered aloud about the bank's progress in "cleaning" its crap. 'Could/should we have cleaned up these books before,' Blankfein wrote in one e-mail, 'and are we doing enough right now to sell off cats and dogs in other books throughout the division?'"
Shorting the mortgage market was/is not a crime, but Goldman misled its clients to buy these crap mortgage-backed assets while Goldman itself was making massive bets against them. Broker-dealers like Goldman are required by the SEC to disclose "material adverse facts" to their clients which includes among other things Goldman's "adverse interests" in selling off these bad assets.
A Senate committee has laid out the evidence. Now the Justice Department should bring criminal charges
By Matt Taibbi
May 11, 2011 | Rolling Stone
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