Godman Sachs: Power and Peril

Inside CNBC’S Goldman Sachs Iinvestirgation
By Jonathan Dann

As we investigated Goldman Sachs’ controversial financial dealings, we faced a special challenge. Due to the largely unregulated nature of derivatives, such as synthetic Collateralized Debt Obligations (CDO’s), information that normally would be accessible to the press was not.

To solve the problem, we turned to a Cleveland-based specialist in network computing, Valdis Krebs. Krebs is an expert on weaving together disparate bits of information into a coherent whole and has an array of corporate and journalistic clients. Using a mortgage data base as well as internal Goldman documents released by a U.S. Senate subcommittee, Krebs helped CNBC trace individual mortgages in Cleveland to Goldman’s mortgage-backed securities and from there to the bank’s controversial Hudson Mezzanine Funding 2006-1 deal.

That deal came under scrutiny following accusations from the Senate’s Permanent Subcommittee on Investigations that Goldman Sachs sold securities which permitted the bank to invest against high-risk assets that Goldman Sachs wanted to get off its books. By establishing that individual mortgages in Cleveland were part of the Hudson deal, we raised the question of whether Goldman was able to gain financially by taking a position against some of the very investments that it had offered to customers months earlier.

Valdis Krebs is an internationally known expert in network analysis and data visualization. He finds and maps hidden patterns in data, information flows and business/political relationships. His clients include businesses, non-profits and foundations, local, state and national governments. He is an invited speaker at major conferences and universities around the world. He has been interviewed on radio and TV and his work has been featured in major publications.