TomDispatch: Laura Gottesdiener, Wall Street's Rental Empire

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http://www.tomdispatch.com/post/175777/tomdispatch%3A_laura_gottesdiener%2C_wall_street%27s_rental_empire/

TomDispatch: Laura Gottesdiener, Wall Street's Rental Empire

Posted by Laura Gottesdiener 7:44am, November 26, 2013.

“One shitty deal.” “Shitty deal.” “Shitty.” The date was April 27, 2010, and Senator Carl Levin (D-Mich.) was pissed as he launched into a rant with those pungent quotes in it. As part of a Senate subcommittee investigation into the causes of the financial meltdown, Levin was grilling Goldman Sachs CEO Lloyd Blankfein and several other current and former Goldman higher-ups about their roles in that crisis and in particular the exotic, opaque investment deals they had created and peddled.

What had Levin steaming mad were internal emails revealing that, on the cusp of the financial crisis, Goldman staffers knew that they were selling crummy investments. Levin’s tirade was inspired by an email in which a Goldman staffer describes a product he’s selling as “one shitty deal.” That, of course, did not stop Goldman from selling such products. Not only that, but the firm's traders later bet against those deals to make even more money! Contempt, thy name is Goldman.

At the heart of that April 2010 hearing, and at the heart of the financial crisis itself, were countless “shitty deals” in the form of so-called mortgage-backed securities. Remember those? It’s been a few years, so here’s a quick refresher. Wall Street firms like Goldman cooked up an idea to bundle together thousands of home mortgages -- loans made to people from Fresno to Lubbock to Kalamazoo to Baltimore -- and sell them to investors. Goldman profited off their sale and, as long as those homeowners made their mortgage payments, investors enjoyed a constant income stream.

But as we now know, many of those home loans were filled with tricks and trap-doors and, in some cases, were made to people who simply couldn’t afford them. First gradually, and later in cascades, millions of people stopped paying their mortgages, which meant that those mortgage-backed securities went sour. The losses were historic, plunging the U.S. economy into what we now call the Great Recession.

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But as Laura Gottesdiener writes today, you can’t keep a bailed-out industry down. Wall Street and its masters of the universe are at it again. They’ve devised a new way to profit off the housing market -- and this time it has nothing to do with risky mortgages. Now, Wall Street is securitizing something else: your rent check. Andy Kroll

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