Wall Street WARZONE
How Wall Street Forced Mortgage & Credit Lenders to Make Risky Loans for John Paulson. Then Made Secret Profits Shorting Their Own Toxic Securities
by Paul B Farrell, JD, PhD
| Discuss | Print | 4/23/2010

Irrational greed worked overtime when it came to the mortgage loans Wall Street manipulated in creating the “subprime” credit bubble. The greed starts at the top: Investment banks control the money flow spigot. Wall Street bankers made huge fees raising money for mortgage companies by repackaging and selling bundles of home loans as securities to naive institutional investors worldwide, usually without full disclosure. Mortgage executives and their brokers  also got rich making big fees and commissions on loans to millions of marginal credit homebuyers, who were chasing the great “American Dream” of home ownership. In 2007, the politics driving the pro-Wall Street government policy was exposed. Still, nothing was learned, today it’s far worse.

Fortunate for Wall Street, the newly-appointed Treasury Secretary Hank Paulson happened to be a former CEO of Goldman Sachs, a leader making huge fees hustling securities backed by subprime mortgages. In 2008 Paulson acted surprised at the meltdown. He shouldn’t have been: Back in 2006 Paulson warned the White House of the dangers a month after taking office.  Later when forced into action, Paulson engineered a bailout of Wall Street banks, rather than focus on the millions of homeowners facing foreclosure. Paulson’s top priority protecting his buddies at Goldman and AIG, the main insurer of tens of billions of Goldman’s toxic debt, which Goldman secretly shorted after selling to the debt to clueless investors (a conflict of interest), debt that would have driven Goldman into bankruptcy. (More)