The Goldman - SEC Tangle
When someone makes a very flashy statement , it quickly catches the imagination of the public..News sites repeat it again and again because of its sensationalist value..If you read in general about the global financial industry, this statement wouldn't have missed you last week - " When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else's house and then committing arson ".. A very catchy statement made as an accusation against Goldman Sachs recently..However if you dig a bit deep into this extremely interesting case, you would find that this statement is metaphorically wrong to be used in this context. At the heart of this entire quagmire is this structured financial product called 'Synthetic CDO's' .It actually seems to be like a gambling instrument.Player A thinks that a particular market ( in this case the housing mortgage market ) will tank. He thinks that he can profit out of...
