> That they were selling MBS tranches to clients, then simultaneously taking out options that would pay GS money when those exact same tranches failed, really tells you all you need to know.
No, it doesn't. This not necessarily scummy or a conflict of interest. GS could have hedged its own long positions, for one (i.e. still net long). Or GS could even be net short, overall, and still have independent divisions, advisers, or traders who are individually long.
No, it doesn't. This not necessarily scummy or a conflict of interest. GS could have hedged its own long positions, for one (i.e. still net long). Or GS could even be net short, overall, and still have independent divisions, advisers, or traders who are individually long.