I’ve been having a debate with Glenn Yago on this blog about financial innovation, so it was good to be able to sit down with him and talk face-to-face:
When Goldman Sachs noticed a pattern of regular losses in its mortgage book at the end of 2006, it decided to start going short, in a move which helped to position it as the most successful bank in the financial crisis. The markets have learned their lesson: now that Greece and Portugal have been downgraded, the rush to the exits is palpable: the flight to quality is on, and bond yields in the European periphery are going stratospheric.
I am awed by Carl Levin’s ability to orchestrate press coverage of Goldman Sachs of late. When he released some pretty benign emails from Goldman, they got splashed all over the front page of the NYT; and today’s batch of emails is causing a whole new set of headlines, even after today’s WSJ story along similar lines.
I just had a very interesting conversation poolside at the Beverly Hilton with a couple of high-profile delegates at the Milken Global Conference. The pool, one level down from where all the panels take place: is clearly the place to be: Arnold Schwarzenegger was just a couple of tables away. But I doubt he was talking in great depth about the Greek debt situation and what’s likely to happen there.
John Carney and Teri Buhl have a tantalizing story up at the Atlantic today:
Traders at Deutsche Bank sold similar collateralized debt obligations (CDOs) — built from credit protection on a portfolio of mortgage-backed securities selected in consultation with hedge fund manager John Paulson — to the German bank. And like Goldman, Deutsche Bank didn’t reveal Paulson’s role in the construction of the CDOs.