FOUR CORNERS: ONE SHITTY DEAL – Monday 14 June at 8.30pm on ABC1
On the 22nd June 2007, a senior executive at Goldman Sachs, America wrote an email to the head of the company’s mortgage division saying:
“Boy that Timberwolf was one shitty deal.”
The email is both revealing and damning. Timberwolf was really just a fancy name for a billion dollar investment package, tied up with the US sub-prime mortgage market and sold by Goldman Sachs. As Four Corners shows, the New York bank had reason to believe the package was not a good investment for their clients.
In mid 2007, Goldman Sachs, Australia sold the Australian hedge fund Basis Capital an investment in Timberwolf valued at $100 million. Within days, as the sub-prime market in the United States began its meltdown, Timberwolf began to collapse in value. This week, Basis launched a $1 billion civil case against Goldman Sachs over the deal.
The US Senate and the country’s regulatory authorities also want to know why one of the country’s most respected finance houses was selling a product that was “crap” and why Timberwolf and other products collapsed in value within months.
Hundreds of Australian investors are asking the same thing.They invested in Basis believing they could get good returns. But many did not understand that Basis was investing in risky collateralised debt obligations (CDOs) linked to the US sub-prime market. Not only Goldman Sachs, but other big Wall Street firms had also sold CDOs to Basis.
Marian Wilkinson talks to the investors in Australia who lost their hard earned cash, and the regulators who were supposed to protect them. Authorities in Australia seem surprisingly relaxed about how the deals were done, suggesting that the securities were marketed to qualified finance houses that knew how to assess the products.
For the people in Australia that lost $350 million in Basis, that might be cold comfort. All they know is their investment was infected with something even bank executives are calling “a shitty deal”, and so far in this country very little has been done about it.
“ONE SHITTY DEAL” goes to air on Monday 14th June at 8.30pm ABC1. The program is replayed on 15th June at 11.35pm. It will also be available online and on iView.