Can anyone explain the Goldman Sachs mess coherently so I can understand?

I’ve been reading about it in “The Oregonian” newspaper every day and I still don’t understand those kinds of investments. That may be because I get excited if I can put $100 into my savings account! That’s my type of investment! I’ve read information about it over and over again, so I thought that maybe if I read it aloud as if I were talking to someone and explaining it, maybe it would eventually sink in. So I found this old picture of Teri and Cindy, sitting still for a change, and looking quite happy. So I started reading and pretended they were happily responding to what I was saying. Last Friday, April 17, 2010, our government accused Wall Street’s Goldman Sachs of selling mortgage investments without telling the buyers that the securities were made up of input from a client who was betting on them to fail. They did fail which cost investors close to $1 billion. This helped Goldman client Paulson & Co, a hedge fund, capitalize on the housing bust.

The SEC says Paulson & Co. paid Goldman about $15 million in 2007 to invent an investment tied to mortgage-related securities that the hedge fund thought would decline in value. At the same time, Paulson took out a form of insurance that allowed it to make a huge profit when the value of those securities went down the toilet. Paulson & Co. was among the first on Wall Street to bet against subprime mortgages with the firm making over $15 billion in 2007. Even now Paulson is making billions more, mainly by betting against bank stocks and then buying them back after their shares plunge.

By this time, I was totally confused, disgusted and dismayed at the inefficiency of the SEC. Why didn’t they do something earlier? Why were they dragging their feet? And what does all of the above mean? I still don’t know what derivatives are or just what a hedge fund is. A hedge fund seems to me to be a few men with millions who play with other peoples’ money to make more for themselves. They don’t have the regulations other firms have so can do pretty much what they want. They are a bunch of stuck-up bastards as far as I’m concerned. I visited Teri and her family in New York a couple of years ago, and we ate at a very nice restaurant directly across from the NY Stock Exchange. A group of young men came in, dressed in expensive suits and sat at a nearby table. They were having a great time with their drinks and food and more drinks. I figured they were from across the street and had a lot to be happy about considering their salaries, bonuses and other perks. I wonder if they’re that happy today. Probably so as I don’t think much has changed yet.

Teri and Cindy still look happy in the picture which is more than I can say for myself. I am more confused than before!