His buddies are worried about having to mark the stuff to market. If they had to then a lot of jobs would be lost on Wall Street and of course that is all they are concerned with. The entire market cap of Goldman Sachs is around $90 billion. That’s peanuts compared to trillions of dollars in derivatives tied to the debt.
They were afraid that the debt would be downgraded so that they would have to dump it into a market where 20% is all they could get. It would set off a chain of events that no one can truly predict.
A lot as happened since early August. The main thing is the Fed started taking this stuff as collateral at face value. I think this was done to generate a commerical tranaction that would allow these firms to keep the debt on their books at face value thereby avoiding an event significant enough to bring the house down.
The problem is the downgrade threat. That will only get worst over the next few months do to the ARM resets.
A major downgrade of the debt enough to cause billions to be dumped would probably set it off.
