BusinessWeek’s cover story this week is “Why the Commercial Real Estate Bust Looks So Scary”.
Goldman Sachs has been receiving a lot of attention recently for their big profits and mammoth bonuses – don’t you wish you were on the receiving end of one?
Some of Goldman’s investors aren’t so fortunate. BW opens with a report on the Arizona Grand Resort, a deal which Goldman securitized and sold to investors in 2006. It turned out to be one of the largest busts of the recent economy: the resort defaulted on a $190 million loan.
There’s a great story about lending. If you owe the bank $100,000 and you can’t pay, then you have a problem. If you owe the bank $1 million or more and you can’t pay, then the bank has a problem.
In this case, Goldman sold the loan to investors. Goldman kept its fees, and seems to be in pretty good shape now. What if you are one of the investors in the bonds backed by this loan? Too bad.
