Apr 19, 2010

Subprime Mortgage Flows into Goldman Sachs

On April 16, 2010 the U.S. Securities & Exchange Commission filed a lawsuit against Goldman Sachs alleging securities fraud for selling residential mortgage backed securities [RMBS] the firm knew was made up of failed sub-prime mortgages.

Using our InFlow social network analysis software we linked the failed/foreclosed mortgages from Cleveland, Ohio that ended up in investment vehicles sold by Goldman Sachs. The failed investments were made up of mortgages from all over the country. The map below shows only those failed mortgages originating from Northeast Ohio.

The outer ring on the map [black nodes] are actual properties in Cleveland and NE Ohio with failed mortgages. The next ring, of blue nodes, are the various Trusts that mortgage-lending institutions created to securitize the mortgages and sell to Wall Street. The inner ring of green nodes are major banks that created and/or administered the Trusts and finally the focal point of all inflows is the magenta colored node -- Goldman Sachs.

The customers who bought these financial instruments had not way to fully evaluate the basis [sub-prime mortgages] of what they were investing in. They trusted the intermediary, Goldman Sachs, who they did have a direct relationship with. In networks, distance supports deception and distortion. Network distance also gives Goldman Sachs plausible deniability.

Each major municipality in the U.S. probably has a map of failed mortgages flowing to Wall Street. Goldman Sachs was not the only investment bank selling such products. We have a map for each major investment bank, showing which failed Cleveland mortgages they packaged, and which intermediaries they worked with.


phil jones said...

Clearly, it ought to be possible, today, for any potential buyer of a package of investments to see a map like this before they buy.

Or even an active map / model, implemented like a spreadsheet on which you can play "games of what-if".

Jack Vinson said...

It would be interesting to see the collected map (for Cleveland) with all the major Bank players. Are there five, 20, 100?

Selena Mcbride said...

Buyers may ought to be possible, today, for any potential buyer of a package of investments to see a map like this before they buy because they want to make sure about the ROI on the investments.

It Contractor Mortgage

mortgage lead said...

The rating agencies are also to blame in this fraud. They are rating these bad securities as sound investments. Better look for other investment opportunities elsewhere than deal with these criminals.

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