In the past several months there has been a brewing populist anger against Wall Street firms. I think the anger started to increase dramatically after the passage of TARP which was supposed to provide $700 billion to the nation’s largest financial firms. Many ordinary Americans were frustrated that many firms that caused the financial crisis were being helped by the Government, while feeling that the Government was ignoring them. The anger reached a peak with the AIG bonus scandal in early March of this year, where AIG employees were intimidated and some received death threats.
A colleague of mine who worked dozens of years at one of Wall Streets largest investment banks (not at Goldman) did a through investigation into the roles investment banks played in the financial crisis. From his extensive research he was inform me that he believed Goldman was merely hedging. Even though Goldman sold many CDOs it still had many CDOS on its books tied to mortgages that it wanted to protect itself from default. In fact Goldman probably did not hedge enough because they declared their first quarterly loss since going public in Q4 2008 of $2.12 billion. This loss included a $700 million loss on commercial real estate. If Goldman really thought all the CDOs were junk as the article claims they would not have kept them on their balance sheet.