How did Goldman Sachs gain from this?

[nutmeg]

In the recent Lehman book, guys were trading against others in house. There was no consensus, it was every director for himself. For chrissakes these guys were betting against Fuld trying to save him from himself and save Lehman.

Point being, it may look like they are trading against the client but also could be trading against their own company judgement.

Not saying this is the case here, nothing prevented the buyers from buying if they didn't like the assets nor prevented them from shorting the assets themselves.

 

[nickdes]

Quote from wareco:

Hmmm, I find it highly unlikely that the do-nothing SEC would bring charges against GS, of all people, unless they had a really good case.

Did you forget who sits in the oval office, obama! The biggest socialist we have ever had. The SEC charges are political in nature, obama's gang of thugs are at it again.

 

[bellman]

This whole thing is ridiculous. Whoever bought the dang CDOs should have known somebody was betting against them. It's the way a market works. I really don't see what case the SEC has, and I think this lawsuit only further confuses what the real issues are in the financial crisis. So frustrating.

 

[omegapoint]

Quote from MarketMasher:

True. I wonder who pays the ratings agencies to rate the stuff they create? Hmmm.....not sure....

Well yea, you've got me there I agree they're both criminals.

 

[LeeD]

Quote from MarketMasher:

True. I wonder who pays the ratings agencies to rate the stuff they create? Hmmm.....not sure....

It is invariably the issuer. In this case - Goldman Sachs.

 

[Q12]

How did they gain? Probably not the answer you're looking for, but one possibility:

They knew the SEC news was coming out today, so they went balls out short and capitalized on the pullback, covering at the close. Enough profit to cover any fines and then some, even if they do happen to have "one losing day" this quarter.

The old double reverse back... nice.

 

[omegapoint]

Quote from LeeD:

It is invariably the issuer. In this case - Goldman Sachs.

Still that doesn't recuse the ratings agencies of honestly evaluating the paper. The word cabal comes to mind.

 

[nutmeg]

Quote from omegapoint:

Still that doesn't recuse the ratings agencies of honestly evaluating the paper. The word cabal comes to mind.

In addition, that guy who badmouthed Cramer today was previously an analyst for Moody's. He authored a book on structured finance perhaps he should of sent a free copy to the rating agencies before he picks on GS.

 

[ToSubu]

Quote from riddler:
how did Goldman Gain though?

The current question is NOT how goldman gained directly, the current question IS whether Goldman disclosed what they HAD TO ...i.e. Did Goldman tell their client that the underlying assets for their synthetic derivative were selected by some one who was shorting those very items. Did they do their job when they collected fee from clients and eventually fat bonuses for themselves

It is also possible that Goldman or their important clients gained

see here for more of what I'm trying to say

Quote from the web:

http://online.wsj.com/article/SB100...019776.html?mod=WSJ_business_IndustryNews_DLW

The Dutch bank claimed Merrill Lynch misrepresented that the CDO was carefully structured investment vehicle when Rabobank made a $57.7 million upfront loan in March 2007.

Rabobank claims the Norma CDO was a "dumping ground" impaired subprime assets and was structured with the help of a prized Merrill Lynch hedge fund client as a bet against the mortgage-backed securities market.

Merrill Lynch has asked for the Rabobank complaint to be dismissed, saying the risks inherent in Norma's assets were fully disclosed in the transaction documents and has failed to show Merrill committed fraud.

So..in this Goldman case, the question is, what due diligence did Goldman exercise ? or what did Goldman cover up ? As a broker selling those synthetic derivatives Goldman had a fiduciary duty to tell their clients what they knew or who selected the underlying assets ..or so says SEC

Quote from riddler: they let a hedgefund pick and structure the securities then that same hedge fund shorted because they chose bad securities.....

yes

Quote from riddler: how did Goldman gain by this?

In addition to failing to disclose, the other arm of Goldman MAY have shorted these underlying assets. But I do NOT know as of date ..probably SEC knows something more

And on the question of one arm of Lehman directors shorting or acting against another arm of Lehman ...that is for Lehman and Dick Fuld to fight out...but MAY not affect the general public.... I don't mind IF Lehman's left arm shorted Lehman's stock !! I'd be amused but not very concerned as long as I did not own Lehman....

However Goldman or anyone selling sythentic derivatives to the market that could be sold and re sold land anywhere like in my portfolio ....or yours, should probably concern us and the SEC

agree ?

 

[Swan Noir]

A guest on CNBC commented yesterday that "these deals were created to be shorted".

Past a certain point in this cycle there was more money to be made if you manufactured pools with some tranches that were not just toxic but super-toxic. The very existence of these poisonous obligations created opportunities for very low risk shorts with huge profit potential. Here's the untold story: How did these imbeciles at Lehman, Bear Stearns etc. -- sophisticated financial houses -- create paper that was clearly over rated and correspondingly wildly over priced and hold onto it.

I'm not shocked GS was short tons of it but I am shocked at how many manufacturers were long ... and long to the tune of tens of billions of dollars. Once you pull the pin you can not forget to throw the grenade. Or, I guess, more accurately we have now witnessed what happens when you do forget to throw it. To me there is no more astounding aspect of the entire debacle than that the guys who pissed in the soup then set the table, poured themselves a glass of wine and, as if it were the most natural thing in the world, ate the damn soup.

As the great Holmes was fond of saying "when you have eliminated the impossible, what remains, however improbable, must be the truth."

The fact is Dick Fuld, Jimmy Cayne, Stan O'Neal and a host of other TITANS OF WALL STREET were bent over and raped by their own employees. These department heads and their key lieutenants knew exactly what they were doing. They continued to manufacture toxic waste past the point where they had marketing opportunities to unload it. They had built a machine that was paying them huge bonuses for "reported" profits and they were not going to stop the machine or those bonuses.

We clearly have witnessed a generation of Wall Street CEO's that could have just as easily skippered the Exxon Valdez. By the time they realized how deep they were in it was already too late.