This was in today’s W$J:
Seeing growing turmoil in the market for risky home loans as an opportunity, Goldman Sachs Group Inc. is looking at pushing deeper into the business, ramping up its own subprime-lending operation and pondering the purchase of another.
To me this is an indication that the subprime mortgage meltdown isn’t going to be a big problem for financial markets. Some overextended lenders will fail, a few hedge funds will lose money, and that’s about it. If firms like Goldman are jumping in, there’s certainly no liquidity crisis to worry about. Which means the brunt of the subprime mess will be borne by (a) people who took out loans that they couldn’t really afford when the subprimers were pushing mortgages on all takers last year and the year before and (b) people who probably could afford a mortgage now but can’t get one because all the subprime lenders are being forced to scale back and impose higher standards. Doesn’t really seem fair, does it?