Imagine that Goldman packaged a herd of cattle for sale. Industry standards require it to investigate the herd. (Rating agencies do not perform the inspections; it was Goldman's responsibility.) Cattle had a history of health problems, so Goldman had all the more reason to perform thorough due diligence on each herd. A sample would have revealed that, say, 60% of the healthy-looking herd tested positive for hoof-and-mouth disease, and the disease could possibly infect the others.Read the rest.
Goldman claims it did nothing wrong when it slapped good labels--via complicit rating agencies--on its loan packages, and then sold them. Goldman claims to be good at risk management, yet despite public red flags, it now claims it didn't know any better.