It sure would appear to be so:
During the bubble, Goldman Sachs and other financial firms created complicated mortgage-related investments, sold them to clients and then placed bets that those investments would decline in value. The practice, detailed in The Times by Gretchen Morgenson and Louise Story, allowed Wall Street to profit handsomely as its clients tanked. It also amplified the financial meltdown, spreading the losses to pretty much everyone. These deals are now the targets of various government and industry-led investigations...
..To be thorough, investigations of these and other questions would have to reach into the Obama Treasury Department. One of the most aggressive creators of the questionable investments was a firm called Tricadia, whose parent firm was overseen by Lewis Sachs, now a senior adviser to Treasury Secretary Timothy Geithner.
That's right, our Treasury Secretary took on as a key adviser, Lewis Sachs to help determine how to spend taxpayer money to clean up the mess he played a major part in creating to bail out the bankers his products screwed.
Talk about the foxes guarding the henhouse.
The Obama Treasury department currently has on its payroll, as a key advisor to the Treasury Secretary itself, a man who created synthetic CDOs. Normal CDOs are derivatives which bundle a number of bonds and other securities into one package. Their value normally represents the risk-adjusted present value of expected cash-flow from the underlying securities, often mortgages or other asset-backed loans, or corporate debt backed by a set of assets which in theory can be seized in the event of a CDO (collateralized debt obligations) default (or series of them). Synthetic CDOs, on the other hand, bundle a number of non-cash securities (such as the credit default swaps that took AIG down) and are sold to give particular investors synthetic exposure to the same sorts of market movements (like a tanking housing market) as a normal CDO. They basically facilitate the sort of casino behavior which caused the market meltdown in the US last year, and unlike normal CDOs, they can be manufactured from whole clothe.
Some of the casino behavior was well informed, as some participants, like Goldman Sachs,or famed sub-prime market bear John Paulson, made billions by betting against the underlying derivatives they themselves in some cases sold into synthesized CDOs, using a set of credit default swaps whose ultimate payout was someone else's problem (i.e., AIG) as underlying "asset". On the losing end of those bets? Banks and insurance companies around the world, the ones we've been bailing out, to the tune of hundreds of billions (not counting fed actions) ever since. The accusations of fraud are now flying increasingly thick, the accusation being Goldman et al knew full well the products they got so rich selling would blow up, screwing everyone else.
And Lewis Sachs, key advisor to Timothy Geithner, was in the thick of things, throwing fuel on the fire. How did this guy get hired?
Now, some would say that, as in the film Catch Me If You Can, it's good to have someone guilty of creating the financial crisis in place to help clean it up. And, they would have somewhat of a point. But, this point forgets the fact Frank Abnegale, the famed check forger, was investigated, tried, and paid for his crimes with five years spent in prison. Having such a fox guarding the hen house at the Treasury would find Michael Milken (who at least has repented for the market crimes he committed and who has done much to make amends) in the office Mr. Sachs currently occupies.
So, in the case of Mr. Geithner's "key advisor," an investigation certainly is in order. Not just of Mr. Sachs, but also, of Mr. Geithner's hiring practices.