TEXT OF STORY
Renita Jablonski: Goldman Sachs is expected to make a minor breakthrough in the battle against the credit crunch later today. The investment bank is close to clinching a deal involving $7 billion of complex asset-backed securities. Stephen Beard reports.
Stephen Beard: Goldman Sachs spent 10 months on the deal, and it’s easy to see why. The bank’s been sorting out an immensely complicated financial package, formerly run by a London-based hedge fund.
It’s a structured investment vehicle. Like a sausage containing many different types of meat, this vehicle holds lots of different assets. Some of them are mortgages of high quality, some are distinctly dodgy.
What Goldman Sachs seems to have done is isolate the good and jettison the bad. What’s left should be easier to sell. An important step to easing the credit crunch.
But Michael Hampden-Turner of Citigroup warns against over-optimism:
Michael Hampden-Turner: Investors are still highly sceptical of structure finance, and I think that will take, it will take some time before faith is restored.
The Goldman deal could lead to the shake-up of $18 billion worth of structured vehicles. But the total value of such vehicles in is thought to be more than $200 billion.
In London, this is Stephen Beard for Marketplace.
We’re here to help you navigate this changed world and economy.
Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.
In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.
Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.