If this isn't criminal activity, I don't know what is. Goldman Sachs sold mortgage-backed securities to its customers, then bet against them - they WANTED their customers to lose money, so they could profit!
In late October 2007, as the financial markets were starting to come unglued, a Goldman Sachs trader, Jonathan M. Egol, received very good news. At 37, he was named a managing director at the firm.
Mr. Egol, a Princeton graduate, had risen to prominence inside the bank by creating mortgage-related securities, named Abacus, that were intended to make money for Goldman if the housing market collapsed. And just as planned, the firm pocketed huge profits when they did turn sour.
Goldman’s own clients that bought them, however, were less fortunate. Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments, according to former Goldman employees with direct knowledge of the deals who asked not to be identified because they have confidentiality agreements with the firm.
Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner.
More:
http://www.nytimes.com/2009/12/24/business/24trading.html?_r=1&hp
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