A foreclosure sign hangs in front of a home in Miami.
A foreclosure sign hangs in front of a home in Miami. - 
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KAI RYSSDAL: Today, had all the signs of another rout in the equity markets, at least 'til lunchtime or so. There was a 200-point swing from low to high. Much of the nervousness caused by, once again, the subprime mortgage market. But not everybody is skittish about those subprimes. Some big names on Wall Street are stepping up. Kate Kelly is with The Wall Street Journal. Kate, good to speak with you.

KATE KELLY: Good to talk to you, Kai.

RYSSDAL: Let me make sure I have this right. Investors are running away from subprimes, regulators are taking a very close look, yet, Goldman Sachs somehow sees opportunity here.

KELLY: They do. I mean, Goldman has been a relatively small but sort of active player in the subprime space for a while. And they have said there are two things that concern them. One is the sort of reputation risk of being associated with these companies, which don't have a great reputation themselves. The other is just kind of the timing of the cycle. And there were other investment banks that bought subprime lenders at higher points on the market and paid big prices. Goldman now realizes that given all the turmoil in the sector, they might be able to snap up one of the lenders for a fire-sale price basically.

RYSSDAL: There are obviously a bunch of smart people over there. They just reported record profits. But unless they can change the business model somehow, isn't subprimes these days, sort of like squeezing blood from a stone?

KELLY: Obviously, it's been a sort of troubled model for a while. And it kind of doesn't make sense to sign people up for mortgages that they can't possibly afford. So it does appear that there are gonna be some tweaks in the marketplace to say the least. The CFO of Goldman talked a little bit about the need for high standards yesterday. However, nobody thinks that subprime lending is gonna disappear. It's still a sector of the marketplace where the lenders can make some profits. And I think it's here to stay.

RYSSDAL: Let me get back to this reputation thing for a minute. Doesn't it sort of look just a bit, you know, rapacious, frankly, getting in there and getting what they can?

KELLY: There is this issue of the sleaze factor. And I think they're concerned about that. And they had said that any acquisition we make, we're gonna subject to our usual standards and make sure that we're involved in a quality enterprise. I do think they would probably argue this is an amoral sort of business situation and they're trying to make money for their shareholders by taking a good business opportunity.

RYSSDAL: Kate, in your article this morning, you also talked about the Massachusetts regulators who have issued some subpoenas to Bear Stearns and UBS about some stock research that they wrote. What more can you tell us about that?

KELLY: This is a case where the security secretary in Massachusetts is trying to crack down on what he feels was, isn't genuine research or, or even just sort of poorly conceived research on New Century and the mortgage sector, and New Century being the Irvine-based subprime lender that's had so many troubles of late. But, you know, in the Bear Stearns case this analyst had essentially a sell rating on the company until March 1st when he upgraded his rating to the equivalent of a neutral. The company sort of imploded not long thereafter. And it was a bad time to be anywhere close to bullish about it. However, to be fair to the company and the analyst, he did make the point that he thought investors might be best served sort of waiting on the sidelines. And he points out some of the issues that were at the company. So I do think the guy had a more nuanced view. On the other hand, going from a sell to a neutral when a company is on the brink of collapse isn't the best.

RYSSDAL: That sort of adds to the it-doesn't-really-look-good factor.

KELLY: Yeah. Yeah. Not fair enough.

RYSSDAL: Kate Kelly at The Wall Street Journal. She covers investment banks for the paper. Kate, thanks a lot.

KELLY: Thank you, Kai. Have a good one.

Follow Kai Ryssdal at @kairyssdal