Good Read From the Real Estate Blogger

How do you make billions of dollars and screw every taxpayer, millions of pensioners, and get away with it?

Work for Goldman Sachs.

That seems to the be the story of the housing crisis as reported by McClatchy in a special report. And the worst part of the story is that there will be no consequences for the company, the politicians that helped create this mess, and those who lost huge amounts of money.

Check this out:

McClatchy’s inquiry found that Goldman Sachs:

• Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they’d misled borrowers or exaggerated applicants’ incomes to justify making hefty loans.
• Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean that companies use to bypass U.S. disclosure requirements.
• Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.
• Was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.

The firm benefited when Paulson elected not to save rival Lehman Brothers from collapse, and when he organized a massive rescue of tottering global insurer American International Group while in constant telephone contact with Goldman chief Blankfein. With the Federal Reserve Board’s blessing, AIG later used $12.9 billion in taxpayers’ dollars to pay off every penny it owed Goldman.
These decisions preserved billions of dollars in value for Goldman’s executives and shareholders. For example, Blankfein held 1.6 million shares in the company in September 2008, and he could have lost more than $150 million if his firm had gone bankrupt.
With the help of more than $23 billion in direct and indirect federal aid, Goldman appears to have emerged intact from the economic implosion, limiting its subprime losses to $1.5 billion. By repaying $10 billion in direct federal bailout money — a 23 percent taxpayer return that exceeded federal officials’ demand — the firm has escaped tough federal limits on 2009 bonuses to executives of firms that received bailout money.

So you have the sitting Treasury Secretary, Henry Paulson who (surprise, surprise) was the former head of Goldman Sachs, calling the current head of the company for advice on how to manage the housing and lending crisis. And the result is the decimation of a competitor and a bailout of Goldman with taxpayers money.

Oh, and did I tell you, Goldman Sachs reported record earnings in July when most of the other financial companies were still losing money hand over fist.

So lets recap, Goldman lent billions of dollars to homeowners who could not pay. Then they sold the debt as grade AAA to pension funds who lost a fortune. Then got huge bailouts for their poor investments while orchestrating the demise of it’s rivals by selective government participation coordinated by a former chief exec of the company who is now the Treasury Secretary.

Absolutely horrifying in my book.  However, with Goldman Sach's ties to government and the scandal that would occur if this became widely known, this scandal will never be fully investigated or prosecuted.