In “Banks Bundled Bad Debt, Bet Against It and Won,” New York Times reporters describe how Goldman Sachs and other financial firms earned billions and cost their customers trillions “creating mortgage-related securities . . . intended to protect Goldman from investment losses if the housing market collapsed. . . . Worried about a housing bubble, top Goldman executives decided in December 2006 to change the firm’s overall stance on the mortgage market, from positive to negative, though it did not disclose that publicly. . . . Goldman created even more of these securities, enabling it to pocket huge profits. . . . Pension funds and insurance companies lost billions of dollars on securities that they believed were solid investments. . . . Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc., an investment company whose parent firm was overseen by Lewis A. Sachs, who this year became a special counselor to Treasury Secretary Timothy F. Geithner. How these disastrously performing securities were devised is now the subject of scrutiny by investigators in Congress, at the Securities and Exchange Commission and at the Financial Industry Regulatory Authority, Wall Street’s self-regulatory organization . . . . One focus of the inquiry is whether the firms creating the securities purposely helped to select especially risky mortgage-linked assets that would be most likely to crater, setting their clients up to lose billions of dollars if the housing market imploded. Some securities packaged by Goldman and Tricadia ended up being so vulnerable that they soured within months of being created. . . . ‘The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen,’ said Sylvain R. Raynes, an expert in structured finance at R & R Consulting in New York. ‘When you buy protection against an event that you have a hand in causing, you are buying fire insurance on someone else’s house and then committing arson.’”