For good measure, McClatchy has a piece from yesterday that has Goldman jumping into subprime with both feet early:
Soon, the Goldman subsidiary was in the jet stream, dealing with some of the most aggressive and controversial subprime lenders — including Ameriquest (through a subsidiary), New Century, Fremont General, National City and First Franklin.
…and finds a couple of risk managers for a contractor that reviewed the loans who say “everybody knew” what they were funding:
Toy said she concluded that the reviews were mostly “for appearances,” because the Wall Street firms planned to repackage “bogus” loans swiftly and sell them as bonds, passing any future liabilities to the buyers. The investment banks and mortgage lenders each seemed to be playing “hot potato,” trying to pass the risks “before they got burned,” she said.
“There was nobody involved in this who didn’t know what was going on, no matter what they say,” she said. “We all knew.”
Goldman is forced into one of the more unconvincing defenses of the year:
Goldman spokesman [Michael] DuVally said that the firm’s standards for reviewing the loans were “at least as high, if not higher, in 2006 than they were in 2002.”
But he didn’t elaborate on what scrutiny was demanded.
This is new information from McClatchy. Dismissing this kind of work is, again, a mistake.