The Unnecessary Meltdown - The Daily Beast

Goldman reduced its exposure to mortgages “early,” Viniar said, “before most people had a view that the world was getting worse.” At one point before the magnitude of the problem became crystalline, Viniar thought that Goldman had become too bearish, and insisted that the firm’s traders reverse course somewhat. That decision later cost the firm around $200 million. “They were 100 percent right,” he said. “I was 100 percent wrong.”

Curiously, other firms did not follow Goldman’s lead and, in fact, during the first quarter of 2007 used the perceived weakness in the market for mortgage securities as an opportunity to double-down on their already huge long bets. This was the turning point. If Bear Stearns, Lehman Brothers, Merrill Lynch, Citigroup and AIG had the same perception of risk as did Viniar and his colleagues at Goldman Sachs, there might have been a downturn, but there wouldn’t have been a meltdown.

I never get tired of reading this stuff.... Also, check out Liars Poker . I read the book back before I joined Salomon Brothers' Technology arm to help set up the 7 WTC trading environment. Good read.