You have no evidence, of course, of such a collusion. The only support you offer amounts to (i) two people have been observed in the same room at the same time, and (ii) it’s human nature.
It is true, of course, that “GS has spun the door with particular frequency.” That is very easily explained by the fact that GS is well known to attract and retain the best and the brightest --- the source of envy by the rest Wall Street. This time, too, they it was the only one to get it right: about six months before the crisis, it became alarmed at the housing prices and started to reduce the exposure. No, GS management did not see the crisis coming, but GS was in a pretty good shape when the crisis hit --- better than the rest of Wall Street. GS hunts for the best and the brightest, so it I unsurprising that, when presidents seek economic advisers, they often find them at GS.
To see this point better, consider that about 20% of all Justices that served on the Supreme Court in our entire history were alumni of Harvard Law School. If I suggested that there is some kind of collusion, you’d laugh and say: “There is a simple explanation (Occam’s razor): Harvard Law is one of the best schools, and it is unsurprising that some of the best and the brightest rise to the Supreme Court.” Well, that same reasoning applies here. And it is corroborated by the fact that GS alumni served both Republicans and Democrats.
The situation is actually simpler: it is hardly possible in this country to have a conspiracy of half a dozen people --- someone always finds a reason to benefit from blowing a whistle. Matters that you are talking about involve hundreds of decision-makers --- conservative patriots and liberal loons, Republicans and Democrats. The events of 2007 have been looked into for the past two years very closely. Obama would love nothing better than to uncover Paulson’s supposed actions in the interest of GS rather than the country. None of that has been even alleged by anyone (other than conspiracy theorists). No such conspiracy could possibly work: someone would blow a whistle --- to promote his career, if nothing else. I don’t blame you being misled by the commie propaganda we constantly hear, but the following is simply a misunderstanding:
holders of dodgy mortgage backed securities were stared in the face by their own potential insolvency and decided, as the maxim now goes, not to let a crisis go to waste.
Wall Street does not hold those securities: it only helps to create them. The securities are held by pension funds and other institutional buyers.
It is also a deliberate lie (perpetrated by the government, trying to deflect the responsibility from itself, and the media): MBS have nothing to do with the crisis.
Securitization has been with us since late 1980s and never created a crisis. On the contrary, some papers even partially credited it with the boom we had in 1990s (and rightfully so: by reducing risk, it reduces the cost of capital so much needed by companies).
The housing crisis was created solely by the Community Reinvestment Act of 1998 (requested by Clinton, Rubin’s committee modified the Carter’s earlier act), which mandated that banks give a certain proportion of loans to those that cannot afford them under normal standards. That was a pure social engineering, an attempt increase home-ownership in inner cities. The proportion of bad loans was specified and increased to 52% in 2007. It was Fannie and Freddie that were obligated to buy those loans. M
(Note how Fannie and Freddie were completely excluded from the Frank-Dodd regulation. Why? Because any discussion of that matter in Congress would quickly lead to the real culprit --- Congress and its CRA of 1998. You would be angry today at Clinton and not on Wall Street, and Pelosi, Barney Frank and Maxine Waters did not want that to happen. The latter two, BTW, were the ones responsible for the oversight of CRA. So finger-pointing at Wall Street began. To deflect the blame, various financial institutions started to point at each other. That is how you started to hear nonsense about the MBS, the rating agencies, Goldman --- anybody but the real culprit.)
To continue: once bad loans were demanded by Congress, banks (commercial, not Wall Street) responded by relaxing lending standards. How else could they satisfy that stupid demand: if more loans cannot be issues under the existing standards, then those standards must be relaxed. So some of the loans that got into the MBS pipeline where indeed bad. Because they were diluted by really good loans, they appeared less dangerous than they actually were. And, the disaster did not strike right away, so people started to believe --- all people, commercial banks, Wall Street, rating agencies, pension funds that purchased MBS, Warren Buffett --- that there is no problem. That’s what happened.
Securitization is like a pipe into which contaminated water (bad loans at the point of origination by commercial banks) was pumped. Yes bad water came out at the other end, but the pipe (securitization) has nothing to do with it: the water (loans) was bad on entry. Blaming MBS is red herring being sold by Obamites.
So what were the “the actions of autumn 2008”to which you refer? What happened was an attempt to let “too big” to actually fail. The government stood aside when Lehman fell (that too is blamed on Paulson: he just wanted the competitor to fall. Damned if you do and damned if you don’t. More importantly: it was not just up to him to take or not to take that action). But things turned out to be worse than Bush and Paulson thought. Lehman fell because of a run on it by institutional investors. As long as it was just a few institutional investors, Bush and Paulson let it fall. But then it turned out that AIG and other will be also in trouble, which will lead to run on all banks --- by Joe and Jane on their corner banks as well. That would be a complete collapse of the economy. The actions taken were taken for a sole reason: to prevent this massive run on banks. There is not an economist, conservative or liberal, that would suggest that no action should’ve been taken to recapitalize banks.
It is also important to remember: banks never asked for a bailout; it was dictated to them --- by Bush to prevent collapse. Goldman, being in pretty good shape, was particularly against that. Much later, it wanted to repay the “bailout” money early. Obama refused. Just recently, when testifying before Congress, Blankfein “reminded” congressmen of these facts (they tried to shame him into taking “our money”). I’ve heard that on C-Span, by the way. GS raised $5B in the markets and could raise more if they needed the money. They did not and did not ask for it; it was forced on them.
Nobody on FR seems to remember also that it was Detroit CEOs who actually asked for the bailout, multiple times, and even blackmailed Congress.
Why? Because all leftists since Marx, trying to bring down capitalism, tried to anger the populous at the very symbols of capitalism --- financial institutions. This is because it is easy to do: very few people know how they function. So Marx, Lenin, Hitler and Mussolini all pointed to “financiers,” those blood-suckers who seem to produce nothing. Roosevelt did the same thing in 1930s, and with the same success as you see now: even some conservatives believed that propaganda.
So, when you spoke of actions of 2008, are these the facts you had in mind? Probably not.
You are correct of course when you apply Occam’s razor. But you should also remember Einstein’s words: “Everything should be made as simple as possible. But not simpler.” In this particular case, your Occam’s razor is too simple. I’ve seen also these words attributed to Einstein: “For every problem there is a simple solution, which is usually wrong.” Too many conservatives give a simple explanation for the crisis ---- so simple that it is utterly false.
Some of us were convinced that there was a danger of "complete collapse of the economy" in September 2008.
Some of us were not, and those of us who were not aren't all tinfoil hatters who see a Bilderberger under every bed. John Allison, former CEO of BB&T, is a great example.
What we heard over and over again during the arguments over the original TARP was that we had a "liquidity crisis". I do not agree. What we had, and still have, is a solvency not a liquidity problem, and until the balance sheets are purged and properly valued we will continue to have that problem.