Yea I'm lost on the gold standard issue or as it applies here. Seems like, from what I understand, this was cause by banks and lenders over leveraging. Sometimes to the point of 30-1, maybe more. In Goldman's case they put a bunch of loans into a bundles that they knew were over valued and or likely fail and sold shares in them without letting buyers know they we likely to fail or at least the full risk. Other clients were buying CDS (credit default swaps) on those loans, basically betting the loans would fail and thus making money off those failures. Who was advised to buy what and when along with how the mortgages were bundles appears to be the issue.
Here's a section of an article about it from the Guardian out of the UK-
Quote:
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For the Goldmans case is in some ways the most damaging. The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured. If the Securities and Exchange Commission's case is proved – and it is aggressively rebutted by Goldman – the charge is that Goldman's vice-president Fabrice Tourre created a dud financial instrument packed with valueless sub- prime mortgages at the instruction of hedge fund client Paulson, sold it to investors knowing it was valueless, and then allowed Paulson to profit from the dud financial instrument. Goldman says the buyers were "among the most sophisticated mortgage investors" in the world. But this is a used car salesman flogging a broken car he's got from some wide-boy pal to some driver who can't get access to the log-book. Except it was lionised as financial innovation
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Enitre Article Here