Seems to me that the press is underplaying the news that Goldman Sachs agreed to a $60 million settlement with Massachusetts for its role in securitizing bad mortgages.

It seems to me that this is something of a landmark event: Wall Street finally being held accountable for its significant role in creating the mortgage crisis.

The FT does give the story front-page play in its Companies & Markets section, but the Journal and NYT stuff the news inside. The Washington Post doesn’t appear to report the story at all. Nobody gives it more than a few hundred words, so to piece together a full story you have to read several—and even then, it’s far from sufficient.

I shouldn’t be surprised. We’ve long complained at The Audit that the press has mostly underplayed the crookedness involved in Wall Street’s culpability for the mortgage mess.

This would be a big story if it were just about Goldman Sachs muddying its white shoes in the subprime sausage factory, but it’s clear that this is just the beginning for Wall Street in Massachusetts. And other attorneys general are sure to follow suit, so to speak.

Here’s the Journal:

But she said “there are other players whose roles are intertwined, and we are looking at” them. She declined to name any of the other companies.

But you can believe the AG is more than “looking at” them. Goldman was far from being the worst actor in this business:

Goldman sold or securitized mortgages, but many of Wall Street’s biggest firms, including Merrill Lynch & Co. (now part of Bank of America Corp.) and Morgan Stanley, both sold loans to consumers and then packaged them for sale to big investors.

While the NYT whiffs by not even noting that the Massachusetts AG is looking at other Wall Street firms, it—unlike the WSJ—does include this information (emphasis mine):

From 2005 through 2007, Goldman issued more than $33 billion in mortgage-backed securities, creating tradable securities from packages of individual subprime mortgages. In 2005 and 2006, it also underwrote $53 billion of securitized loans made by others.

While not the largest financier of subprime mortgages, Goldman consistently ranked in the top 20, sometimes in the top 10. It also added to the housing bubble by providing financing to other leading subprime lenders, including New Century Financial Corporation and Option One mortgage.

Bloomberg doesn’t have either of these bits of info, but it does have this paragraph:

The $60 million settlement was about one and a half day’s revenue for Goldman Sachs’s fixed-income, currencies and commodities division in 2006, when it made $14.3 billion and about one and one-third day’s revenue in 2007.


But the best of all is the hometown Boston Globe, which actually gets some quotes to put this settlement in context and spin it forward:

“This is a landmark case. It is one of the few times we’ve seen somebody who didn’t actually originate the loans being held accountable,” said Guy Cecala, the chief executive of Inside Mortgage Finance, a mortgage industry newsletter. “It is a significant precedent. The question begs to be asked: If Massachusetts can do it with Goldman Sachs, who else can they do it with?”


The companies that issued mortgage-backed securities “played a central role in creating the crisis and have an important role in solving it,” said Eric Halperin, director of the Washington office for the Center for Responsible Lending. “Other states will no doubt look to this latest settlement as a way to hold securitizers responsible for the foreclosures occurring in their states.”

Right. Why didn’t the other outlets have anything like these quotes?

And reading the Big Four’s stories, I didn’t get a good sense of what the AG is alleging and, thus, why Goldman would have settled. The Globe provides that (and also gives the context the NYT does above on its rank in the securitization game):

The settlement stems from an investigation launched in 2007 into the subprime mortgage industry. It began with firms that made the high-cost loans to borrowers, and worked its way up to focus on the banks that had a crucial role in facilitating more of the loans. Coakley is trying to determine if the banks knew, or should have known, some of the loans were unaffordable, and whether the loans should have been made to homeowners and subsequently sold to investors.

The FT has some context that nobody else has:

Goldman’s last big regulatory settlement occurred less than a year ago, when it agreed to buy back $1.5bn of auction-rate securities and pay a $22.5m fine in a matter brought by New York’s attorney-general Andrew Cuomo.

A final point: Fifty million of the settlement is for mortgage relief for 714 Massachusetts homeowners. Nobody notes here that Goldman has probably already written down much of that exposure or would have anyway. That means it’s not taking $50 million in new losses because of the settlement.

Let’s hope there are some second-day stories on the Goldman news, spinning it forward to look at Wall Street as a whole.

I won’t hold my breath.