Is A New Mortgage Crisis Coming? The Goldman Prediction

And the failure rate, well, oil prices hit a high of 147 in July of 2008.

And they finished the year at 32.

And the reason for that was the mortgage collapse started to hit, the mortgage failure rate started to hit 10 and 12%.

And Goldman Sachs predicted the mortgage collapse, as I did.

I mean, they have some pretty good minds there.

They sold off their mortgage-backed securities.

They sold them to clients while they were shorting them at the same time.

That indiscretion, you're supposed to have the best interest of your client to They paid a $565 million fine for that, which, considering they were making a billion to a month, was really not very much.

It was two weeks' profit, a little more than pocket lint.

Morgan didn't see it coming.

Morgan got clobbered.

So one side of the company was making money on the commodity side.

The other side of the company was losing so much, 40 to 1, Leverage is wonderful when you're winning.

It's deadly when you're losing.

Uh, they're about to lose the company.

So they had to drop oil prices so that homes would stabilize and cease that problem.

Now with the mortgage collapse, all of a sudden you, the, uh, the margin lenders would call and say, hey, remember that $39 billion I gave you? I need it back.

The same thing as if you have a stock on margin.

When the stock goes down, you get a call from your broker saying we need more cash.

Well, these people said, we need more cash.

And the bank said, well, we don't have that sitting in a drawer.

It's all out on the street working.

So let's call the insurance companies.

Freddie May, FHA, AIG, Freddie Mac, and all these guys said, well, we have three, four times our normal reserves sitting around in cash in case of an emergency, but you're talking of 100 times because from a tenth of 1% to 10% is 100 times the difference.

And nobody was prepared for that.