More on hedge funds and their role in the crisis
"A number of cases have come to light suggesting that this was going on. The Goldman case is all about “adverse selection” – putting risky assets into CDOs. This was not unique. As the mortgage market weakened, hedge funds eagerly sponsored CDOs to place negative bets – often seeking to push the most toxic debt they could into the structures."
It wasn't only Wall Street: the Swiss bank UBS sold a product called Vertical 2007-1, which UBS staff referred to in internal e-mails as “vomit” and “crap”And the piece goes on to explain how wool was pulled over people's eyes, in a particularly telling quote:
“IKB had an army of PhD types to look at CDO deals and analyse them,” says one CDO investor. “But Wall Street knew that they didn’t get it. When you saw them turn up at conferences there was always a pack of bankers following them.”
For more on IKB, see Jim Stewart's piece in this edition of Tax Justice Focus last year, and the role that offshore played in the latest mess. Read about the role that offshore and tax breaks played here, and read more on the general subject of links between offshore and the financial crisis here.