The United States Senate is all set to reveal its findings from a probe into the US mortgage meltdown that triggered the international financial crisis in 2008. Experts are predicting that Goldman Sachs will take the bulk of the blame and will face more major embarrassment for its hand in the meltdown.
The high profile investigation was headed by the Senate’s Permanent Subcommittee on Investigations. During the course of their investigations the inquiry subpoenaed executives from multiple financial and mortgage institutions including Goldman’s Sachs.
According to sources familiar with the investigation, the Senate will release its findings along with emails from security firms that developed or sold mortgages that were subprime and also financial vehicles that include collaterized debt obligations (CDO).
Before the mortgage meltdown and the financial crisis Collaterized debt obligations were used to help firms hedge their bets with respect to the housing market. However when the bubble burst it took the CDO’s down with it. Overnight their values fell dramatically and they became junk.
Goldman is believed to be at the forefront of creating CDO’s in 2006 and 2007. The company has been accused of making huge bets against the housing market while also offloading bullish position to unsuspecting buyers who had no idea that the market could fall.
According to people with knowledge of the report, both Goldman and Deutsche Bank will be heavily criticized for their role in the mortgage meltdown. Both these firms have been accused of misleading investors about the market.
Also expected to be revealed in the findings is a nasty feud between Goldman Sachs and Morgan Stanley. Morgan Stanley was also a Wall Street Giant and they had a bitter dispute with Goldman Sachs about a deal involving a particular collaterized debt obligation. The particular CDO is believed to go by the name of Hudson Mezzanine Funding 2006-1.
While the report is expected to bring closure to some people who were on the wrong side of this crisis it is expected to bring to light new controversies and bad blood between firms.