It's Called Lipstick on a Pig, and It is Illegal

McClatchy, just finished an investigation of some of Goldman Sachs' behavior, and the lede says it all:

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.

You know, being a bit more optimistic in public than being in private is a fuzzy line. This ain't it.

Later in the article, it is discussed how Goldman, and hedge fund operator John Paulson, bought billions in Credit Default Swaps (CDS) on mortgage backed bonds to profit on the collapse.

Note that Paulson is in a different boat from Goldman, because he didn't sell those bonds in the first place, but once again it shows how the lessons of the South Sea Bubble, which led to the Marine Insurance Act of 1746 have been forgotton and so it is no longer required that people who buy insurance, including swaps, must have a material interest in the underlying asset.

H/t Atrios.