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Is Goldman Sachs really any greedier than the mortgage applicants it dealt with?

The government's civil-fraud allegation against Goldman Sachs centers on a deal the firm crafted so that hedge-fund king John Paulson could bet on a collapse in U.S. housing prices. It all boiled down to whether millions of people like Stella Onyeukwu could pay her mortgage. She couldn't and Mr. Paulson made $1 billion on his bet as a result. Stella, a nursing home assistant/child care owner made pretax income of $9,000 a month. She was having a hard time making the $5,000 a month payments on her $688,000 mortgage on her 6 bedroom house. You read that right, six bedrooms. Already having money problems she applied for a second mortgage of $787,000 with a monthly payment of $5,000 set at 7.5% - 13.5% in 2 years. She ended up with $10,000 a month in mortgages on $9,000 a month income. She's one of 500,00 mortgages that ended up in foreclosure. My question is who's the real villain in this scenario, Goldman Sachs and John Paulson who were greedy and unethical or the 500,000 homeowners like Stella who made $108,000 a year before taxes and of her own free will chose to carry $120,000 per year of mortgage debt on a 6 bedroom home? I realize many people were scammed and misled but they all had to know they'd have more money going out than coming in and if they could handle the monthly payment. So who's willing to chip in their tax dollars and help Stella and her 500,000 friends?

Public Comments

1. In Michael Lewis's book "The Big Short" he writes about a strawberry farm picker in California getting a mortgage to buy a $750,000 house. That's sure a lot of strawberries. It's those who originated the obscene mortgage loans and caused havoc in California that should be questioned.
2. They are all greedy
3. Well Because they have been greedy for decades now I think its time to shut them down so I hope that the Government and the SEC can brings these frauds to justice I believe they have learned from their past mistakes.
4. Goldman Sachs touted the sub prime mortgages to their investor clients at the same time they were betting they'd go belly up---fraud. This has nothing to do with homebuyers.
5. Whether or not the example you've provided is true, traditionally the max payment was never over 30% of monthly income. A person would never expect to be approved if the payment was greater than 30%. It's the job of the mortgage broker/bank to accept or reject applicants. People who don't qualify apply all the time. There's nothing particularly out of the ordinary about your example except that she was approved. There was a whole system set up to approve these people to get rid of housing inventory and to spike housing prices. Developers and home-owners sold their homes at premium prices, title search and insurance and escrow companies walked away with their cut, banks bundled and sold these toxic mortgages and as long as the paper was fluid and being passed around this system worked. When the paper stopped moving, the doo-doo hit the fan . What I'm saying is that along the way a whole lot of people got a big bundle of profit and not one of the people who were approved for mortgages they never should have gotten profited or were part of the scheme. Now, after the bank bailout, the banks are foreclosing on the properties just as the real estate market's coming back to life. Must be nice.