SEC charges GS with fraud

Quote from canuckrookie:

GS is gonna get steam rolled on this one. I completely agree with you, the FEDS wouldn't show their hand unless they were 99% certain they could bring a case and win.
More...

Hence the 3-2 split vote? Lol
 
John Paulson is actually God BUT ONLY HE AND GOLDMAN KNEW IT... therefore it was a material omission and FRAUD to not let everyone else know that GOD HAD PREORDAINED THE PORTFOLIO TO FAIL... even though all parties knew exactly what was in the portfolio. What part of this don't some of you understand?
 
A conservative estimate is that $9 worth of CDS “insurance” has been sold for every $1 in mortgage bond. Therefore, someone stands to gain $9 if the homeowner defaults, but only $1 if they pay. The economic incentives favor foreclosure, not mortgage work-outs or Main Street bailouts.

cont on link..

http://www.newgeography.com/content/00436-blame-wall-streets-phantom-bonds-credit-crisis

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The author has credentials, although the article is nov '08.
 
Earnings are tomorrow morning and everyone is anticipating solid earnings, they might be so great that everyone forgets about the whole SEC and GS episode. Funny how quick people forget and how something this major is just tossed aside a few hours later.


Wall Street has high hopes for Goldman Sachs (NYSE: GS) and predicts that the company will report earnings per share of $4.06 on revenues of $11.1 billion. Goldman Sachs, one of the few banks to emerge from the financial crisis with minimal damage, is expected to build on its past success with another solid quarter. Sales & Trading continues to contribute to a large portion of Goldman’s revenues. Its Asset Management division is expected to show increased revenues over last quarter as well. GS closed at $184.27 Thursday. For additional information on about the risks and upsides to investing in GS, download our free GS trading report.
 
Quote from nutmeg:

A conservative estimate is that $9 worth of CDS “insurance” has been sold for every $1 in mortgage bond. Therefore, someone stands to gain $9 if the homeowner defaults, but only $1 if they pay. The economic incentives favor foreclosure, not mortgage work-outs or Main Street bailouts.

cont on link..

http://www.newgeography.com/content/00436-blame-wall-streets-phantom-bonds-credit-crisis

--------------

The author has credentials, although the article is nov '08.
More...

It's estimated some 80 to 90% of all CDS transactions are naked (buyer/seller does not hold underlying). Another way to calculate - compare outstanding notional CDS value to actual outstanding underlying value. Usually, ratio > 8 to 1. CDS premium sellers are essentially writing DOTM puts betting against a system-wide crash. A lot of those sellers were/are large US Banks, hence the bailout push during the '08 crash. As an instrument, it doesn't need regulation so long as CDS sellers don't get bailouts. For all I care, AIG can insure 20 Trillion in mortgage and Corporate debt, but when the SHTF, they liquidate their capital, sell the building, pay their counterparties (FIFO), then close shop. Most "protection buyers" never get a dime, under that scenerio. Imagine a life insurance company that's got 1 million in capital, sells 1,000 polices each worth a million dollars, and each one of those customers gets on the Titanic. The insurance company pays out the first policy buyer, sells the building, maybe pays out the second policy buyer, and the other 98 get screwed. That's life. Moodys and the rest were total morons, (borderline criminal) for rating that crap AAA. Nothing of the sort.

As much as 80 percent of the credit-default swap market is traded by firms that don’t own the underlying debt, Eric Dinallo, the former superintendent of the New York State Insurance Department, estimated in a January interview.
http://www.bloomberg.com/apps/news?pid=20601208&sid=a0W1VTiv9q2A
 
A little goodie from seekingalpha today:

"Paulson buys ACAS stake. Hedge fund billionaire John Paulson is buying around a 13% stake in business developer American Capital (ACAS), picking up 43.7M shares of a 58.3M share common offering. The move is a boon for American Capital, which has been trying to restructure $2.4B in debt. ACAS rose 5.1% in regular trading yesterday, and climbed another 2.1% after hours."

Is acas related to aca?




back to the real story

Did aca pick the mortgages or not? Were they an expert or not?
If they weren't an expert, then wouldn't the sec be able to go after every deal that was done on the street where aca was the so-called expert and charge the underwriter with fraud? Because aca "wasn't really and expert?"


It strikes me as laughable that gs is being condemned for shorting the stuff they sold to their client. Paulson was a client, too. Paulson paid them fifteen mill. If gs had went long, guess what? They would have been trading against the client that they just helped get short.
 
It's a civil fraud charge. 3-2 vote by the most incompetent agency the regulators could assemble. Do you blame them? Our media is not exactly fair and balanced.
 
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