Goldman's 'Love/Hate' Relationship with Subprime

If you, for a minute, believe that Goldman Sachs isn’t dumping Litton Loan Servicing overboard because of the taint of subprime, then I have some Enron bonds I’d like to sell you. As reported by National Mortgage News 10 days ago Ocwen is eyeing Litton, as are two other investors. A few days ago it was revealed that the Manhattan District Attorney (New York, not Kansas) subpoenaed Goldman concerning the investment bank's activities leading up to the financial crisis. Better late than never, I guess. Despite what you may think of Goldman, it should be pointed out that this white shoe Wall Street firm was damn smart when it came to subprime. Instead of being stupid (like Merrill Lynch, Bear Stearns, Citigroup and Lehman) it never became deeply involved in subprime lending. Instead, it shorted the market through some shady deals that later cost it several hundred million dollars in fines. (Goldman’s shorts also brought down the wrath of Congress, but hey, that’s the price you pay for making money.) All totaled, Goldman made more on subprime than it lost. When the going got tough in late 2007 it stepped in and bought Litton from C-BASS at a fire sale price. And now it’s selling this subprime/specialty servicer -- probably at a profit. Henry Paulson would be proud.