This is not very dissimilar. I am certain the majority of investors who will buy bitcoin did not do their due diligence in term of how the currency works (in fact I see a lot of pretty financially switched on people around me who seem quite confused on how it works). They buy now because they want the return and will complain that they weren't aware of the risks when they lost their shirt.
There's certainly more due diligence that they could have done, but that's a red herring. There was plenty of outright fraud on the part of the ratings agencies. No subprime mortgage should have been rated triple-A. Yes, you could blame investors and pension funds for not realizing that they were systemically duped, and buyer beware and all that, but the ecosystem expected that CRAs were not flat-out lying to them.
Also, some of those investors were legally obligated to invest portions of their portfolio into AAA instruments. Their hands were, quite literally, tied.
> Investors losing money = investors suing. Selling products that you don't believe in yourself = testifying in front of a bunch of angry senators waiving internals emails about "shitty securities" at you.
When I buy a shitty penny stock from my stock broker, and the stock tanks, I can send as many nasty e-mails to him, and my senator as I want. Unfortunately for me, nobody will care one whit.
When Charles Schwab sells me a share of MSFT stock, it's not because they believe, or don't believe in MSFT. Their opinion of MSFT is completely irrelevant to this transaction. They do it because I asked them to sell me a share, and because someone else asked them to buy a share.
When some crook sells me a mortgage that they underwrote, that they then bribed a credit rating agency to rate highly, that I'm legally obligated to buy... That is an entirely different situation. Do that enough, and you bet some state senator is going to be gunning for them.
I am sure there was fraud as well. But fraud doesn't explain the financial crisis. Investor complacency, untested new product, excess leverage and reliance on short term funding, too much liquidity in the system, interest rates too low for too long, these were the fundamental reasons.
There's a world of difference between "We misjudged the long-tail risk of the instrument we rated" and "We straight up lied so that we could keep getting business from the banks."
Half the mortgages in some of those AAA instruments were issued to people with income at minimum wage, or with credit rating in the 500s, or to people buying homes that were never even looked at by underwriters. This isn't a "Whoops, our math was a bit off, we didn't expect the collateral to drop in value for a bit."
This is straight-up fraud, and the people carrying it out should have been taken out back, and had their shirts taken away from them. We need more, not less personal responsibility from our professional sectors.
Fraud is the only thing that caused the financial crisis. Period.
Fraud from the top on through the bottom. The guy lying about his income to the mortgage broker who knew the dude was lying (and likely told him how to do it effectively), to the ratings agencies lying, to the wall street banks lying, to robosigning, etc. etc. etc. It was outright fraud every step of the way and almost no one who participated in that market has clean hands.
This exact phrase should be painted on the wall of the lobby of every investment bank in the world.
This move by Goldman is based on learning. They will trade against the clients. Except they would hedge it.
The problem with subprimes was that banks were issuing questionable loans, and then selling them to investors (Without telling them that the loans weren't worth the paper they were printed on.)
This carries a significant reputation risk because they were, quite literally, defrauding their customers.
A crypto trading desk, on the other hand, just lets them buy or sell crypto on a customer's behalf, and charge them a fee for it - much like Coinbase does for retail customers. They won't have any insider knowledge about crypto, and they probably won't even care if BTC goes to $100,000 tomorrow, or to $0. The customer asks the bank to sell them BTC, the bank gives them a quote, and the customer accepts or rejects it. The bank doesn't know if its a good price, nor does it care - and the customer knows that the bank doesn't know, or care.
There's still ways to defraud customers in this arrangement, but there are far fewer incentives to do so... Compared to offloading toxic, shitty mortgages off your books, after having bribed ratings agencies to rate them AAA.
If you really care about crypto, this is a Good Thing (tm). Currently, the counterparty risk with Bitcoin exchanges is through the roof. Some of them allow illegal wash trades, some of them don't follow KYC, some of them go belly-up and steal all your bitcoin and dollars, some of them may be front-running their users, some of them don't allow half their users to withdraw USD, some of them are down for minutes a day... For anyone trading in an extremely volatile environment (Like Bitcoin), this practically screams: "RUN, DON'T WALK AWAY."
The counterparty risk with a Goldman Sachs trading desk is... Much lower.