Jackie Speier: “By being creative. This is what Goldman Sachs did, and it was really well-described in a book by Michael Lewis, called…”

“By being creative. This is what Goldman Sachs did, and it was really well-described in a book by Michael Lewis, called ``The Big Short,'' in which he writes: In the process, Goldman Sachs created a security so opaque and complex that it would remain forever misunderstood by investors and rating agencies--the synthetic subprime mortgage bond-backed CDOs, or collateralized debt obligations. He goes on to write: Triple B-rated bonds were harder to sell than triple A--no surprise--but there were huge sums of money to be made if you could somehow get them rerated as triple A, thereby lowering their perceived risk, however dishonestly or artificially. So what did they do? Goldman Sachs then went to the rating agency and said, Now, how is it that you rate these particular tranches? They found out. It was really a rating that went on by just looking at FICO scores. So the mortgages were not looked at based on whether they were no-doc loans or whether there was adequate income. They were rated based on a homeowner's mortgage FICO score. So if you could somehow bump up the FICO score on these mortgages, you could turn a BBB into a AAA. And that's what they did. So then they went out and they sold the Abacus one that we heard about last week where John Paulson said he wanted to short all of them; so he put together the worst of the worst, and then Goldman made $15 million for actually servicing that particular instrument.…”