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MBIA Inc. Message Board

  • nilsdegraaf nilsdegraaf Sep 27, 2010 10:14 AM Flag

    Raters Ignored Proof of Unsafe Loans, Panel Is Told

    Combine the two sections below and big chance the investment banks took out those deficient loans found in the sample only.

    At Goldman Sachs, 19 percent of loans failed to make the grade in the final quarter of 2006 and the first half of 2007, but 34 percent of those loans were still sold by the firm. Throughout this period, Goldman Sachs was also betting against the mortgage market for its own account, according to documents provided to government investigators.

    About 17 percent of the loans financed by Deutsche Bank did not make the grade, but the firm still put 50 percent of them into the securities sold to investors, the Clayton report showed.

    The Clayton figures took into account only small samples of the loan pools that were sold to investors. The 911,000 loans Clayton analyzed over the 18-month period were roughly 10 percent of the total number of mortgages in the securities it was contracted to review.

    As a result, it is very likely that many of the loans that were not sampled also failed to meet underwriting standards but were packaged into the securities anyway.

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