Goldman Sachs: Perp?
It’s a beautiful morning. The guys – Bernie, Spence, Admin – are sitting in the sun, talking about some dude name of Goldman Sachs. I’m watching the water flow from the mouth of Leda’s stone swan on the patio – a lovely sight in the sunshine.
“Could we have bought some of these credit default swaps?” Bernie says.
Admin shakes his head. “This isn’t like Hawaiian pants, Bernie.”
“Be nice,” says Spence. “Just give us your little lecture.”
Admin sends a quick unfriendly look his way. “All right,” he says. “Suppose you created some bonds, based on the future value of anything – chew strips, let’s say.”
Suddenly Admin has my full attention.
“Some of these chew strips are top quality – like the kind from Rover and Co. Others – not so good. They’re piled up in a tower, best ones at the top.”
A tower of chew strips: one of the most interesting things I’ve heard in a long time.
“But who wants the crummy ones?” Admin was saying. “So you pile those in another tower, with the best of the worst at the top. Then you go to the chew strip rating agency and say – see these at the top of the new tower? They’re at the top, right? So the chew strip rating agency gives them the same grade as the ones from Rover and Co., even though they’re crap and will never sell. So then you sell the bonds – just a promise to pay when the chew strips sell – to big investors all over the world. Meanwhile, there’s also an insurance you can sell in case the bonds go bust, but you’ve got to be a Wall Street player to buy it. This insurance is called a credit default swap. You don’t even have to buy the towers to get it. You can just buy the insurance, betting that the towers will crash. And guess what – Goldman, knowing because they created them that a lot of these bonds were crap – bought lots of credit default swaps, betting against the bonds they were happily peddling out the other door.”
“So who’s going to jail?” Bernie says.
Not that Goldman dude, I hope. Anyone building towers of chew strips can’t be all bad. Also – how would you get a job at the chew strip rating agency?
This entry was posted on Saturday, April 17th, 2010 at 10:28 am and is filed under Chet The Dog. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.