CANADA BUSINESS

Goldman Sachs: Trust Us, For Real This Time, You Should Buy Subprime Mortgages, Seriously

11/30/2012 12:20 pm ET

Hey, girl, you can totally trust Goldman Sachs now when it suggests you should buy subprime mortgages. Not like that other time.

Goldman is telling its clients to buy stakes in some of the ABX subprime-mortgage indexes that it helped create back before the crisis, back when it was betting against subprime mortgages. It was betting against subprime mortgages so hard that its pet name for that bet was "the big short," just like the Michael Lewis book.

We know Goldman has hurt you in the past. A lot. We know it has only been a few years since Goldman was selling you collateralized debt obligations stuffed with toxic subprime mortgages with one tentacle and then betting heavily against them with the other. But it has paid its dues, baby: $550 million, to be exact. That's real money. Money that took several hours of hard work to make up. Those hours gave Goldman time to think about how it had done you wrong. Actually, scratch that -- Goldman doesn't admit or deny wrongdoing, baby. You know that's not how it rolls. But you get the picture. Anyway, the Securities and Exchange Commission says Goldman is totally in the clear now.

What, you still don't believe Goldman? Fine, just ask anybody on Wall Street. They'll tell you that subprime is the hot place to be these days. Even hedge-fund types like John Paulson and Greg Lippmann, who made billions betting against your house before the crisis, are making a fresh mint in subprime debt these days, Bloomberg writes.

Of course, some of these subprime indexes have already rebounded a whole bunch -- one is up 39 percent this year alone, Bloomberg notes. We can see why you might think this is a perfect time for Goldman to take a profit by finding somebody to take this subprime stuff off their hands. But Goldman is only thinking of what's best for you now, and it says there is still a lot of money left to be made, with some of these subprime indexes priced for "severe future mortgage default assumptions" that just don't make any sense now that housing is on the rebound.

We see you're still skeptical. What's the matter? Have you been listening to that gossipy Greg Smith again, that guy who wrote a whole book, "Why I Left Goldman Sachs," about how the company has become nothing more than a grotesque muppet-milking machine, telling clients to do one thing and then turning around and taking the opposite side of that bet?

Or maybe you're listening to the cynics who called Smith naive because of course Goldman has always been nothing more than a grotesque muppet-milking machine, even beyond The Big Short?

You need to get those haters out of your life. Or at least prepare yourself for the fact that Goldman is going to break your heart again. May I suggest a nice credit default swap?

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