SEC charges GS with fraud

Quote from Trader666:

Speaking of childish responses, how about being an adult and getting your facts straight? I didn't call common dealer hedging practice a "conspiracy theory." I was referring to your implication that Goldman's position was offset yet still misrepresented as a total loss and covered up (as you put it) with "the slick GS PR hook, line & sinker." Do you have any proof? Do you really think Goldman would knowingly do that? This BS is not what the case is about anyway. Tell me how there was material misrepresentation when all participants were experienced institutional investors who knew exactly what was in the portfolio.
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I apologize for trying to help you see how these Abacus transactions played out from a GS standpoint (there were 25 issued by GS). To the best of my knowledge, Gretchen Morgenson has dug deeper than any other finance journalist on these particular deals:

One ex:
Dec 2009 : http://www.nytimes.com/2009/12/24/business/24trading.html?pagewanted=all

To quote:
"Goldman’s bets against the performances of the Abacus C.D.O.’s were not worth much in 2005 and 2006, but they soared in value in 2007 and 2008 when the mortgage market collapsed. The trades gave Mr. Egol a higher profile at the bank, and he was among a group promoted to managing director on Oct. 24, 2007.

“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers. “They saw the writing on the wall in this market as early as 2005.” By creating the Abacus C.D.O.’s, they helped protect Goldman against losses that others would suffer.

As early as the summer of 2006, Goldman’s sales desk began marketing short bets using the ABX index to hedge funds like Paulson & Company, Magnetar and Soros Fund Management, which invests for the billionaire George Soros. John Paulson, the founder of Paulson & Company, also would later take some of the shorts from the Abacus deals, helping him profit when mortgage bonds collapsed. He declined to comment."



There are two other relevant articles from risk.net that discuss these transactions. Google them if interested. Of 500 CDO ratings, Abacus AC1 was rated 498 of 500 by UBS in Fall 2007/early 2008. When computing the aforementioned info from Morgenson, including an upper management that turned negative on these particular Abacus mezzanine tranches 12-18 months prior to AC-1, do you honestly believe GS did not offset the AC-1 0-9% ****equity**** tranche (=$90MM) with CDS/ABX when finalizing the structure with IBK/Amro & ACA/Paulson? All of a sudden, after being negative this tier for 12-18 months, a light bulb went off, and they were going position naked? Seriously, wake up. It is patently obvious you are treading into unknown territory.

Indeed, this "BS is not what the case about anyway." However, you did reference this "BS" as a GS defense, which I proceeded to respond to.

Stop trying to claw out of your own web of ignorance by attempting to spin back to "material misrepresentation." I WAS NOT TALKING ABOUT THIS!!! I have already stated my position earlier in this thread and suspect the SEC will not win this case, with damage stemming from "unethical" behavior superseding any illegality/fines/etc. Not that many here on ET will even notice your bologna, but you are embarrassing yourself.
 
Quote from Syprik:

I apologize for trying to help you see how these Abacus

One ex:
Dec 2009 : http://www.nytimes.com/2009/12/24/business/24trading.html?pagewanted=all

To quote:
"Goldman’s bets against the performances of the Abacus C.D.O.’s were not worth much in 2005 and 2006, but they soared in value in 2007 and 2008 when the mortgage market collapsed. The trades gave Mr. Egol a higher profile at the bank, and he was among a group promoted to managing director on Oct. 24, 2007.

“Egol and Fabrice were way ahead of their time,” said one of the former Goldman workers. “They saw the writing on the wall in this market as early as 2005.” By creating the Abacus C.D.O.’s, they helped protect Goldman against losses that others would suffer.


Stop trying to claw out of your own web of ignorance. [/QUOTE


HAHAHA, and furthermore, Need any of us say more! I do want to say Fabrice was how old? 25 when he started all this ingenius creation! George Soros couldnt have found a better partner; GS!
It even appears GS screwed their employees earlier than those guys even knew what was coming down! Jesus no wonder they felt they needed retention bonuses.
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Quote from Trader666:

... Tell me how there was material misrepresentation when all participants were experienced institutional investors who knew exactly what was in the portfolio.
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I believe this is the problem:

"Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.

"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."
http://www.sec.gov/news/press/2010/2010-59.htm
 
Quote from wmb:

I just disagree with anyone who wants to say GS paid back their funds. I really think the Maiden Lane accounts should be looked at and examined. Gs was allowed to dump their bad mortgages, loans cds, whatever you want to call them; whatever they had in 2008 that was bring ing these companies down. They were given money to dump those bad debts into a tax free account with no strings attached. They have not paid any of this money back nor have they taken the debts back and if they even wanted to they would be in the same spot again because not much has changed with those deals.

No body is giving me any money to take my visa bill, or my house that is engulfing me into BK because I can't pay my bills. If someone were to do that and I got back on my feet and paid everyone I owed but the largest holder of my debt, and I was allowed to pay myself large extraordinary bonuses and still have my bad debts sit in an account killing my largest debt holder, I would be a lucky person. Simple analogy I know for you "sophisticated traders", none the less, GS is a lucky firm!Then only to discover the accusations of Fraud with regards to those debts is even more appaling. They should at least have some dignity and know that if the FED had not come in and take their crap holdings that they arranged with AIg/ paulsen whom everthey would have suffered the same fate as Lehman, BearStearns, and countless other companies.
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The feds took everyone's crap mortgages - GS is not special in this regard.

GS didn't end up like Bear or Lehman becuase they have better risk management. Period.
 
Quote from krazykarl:

The feds took everyone's crap mortgages - GS is not special in this regard.

GS didn't end up like Bear or Lehman becuase they have better risk management. Period.
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Risk Management, hmmm like in the form of GS alumni riddled within the federal offices. Like Henry Paulsen like the head of the new york fed, thats some serious risk management! Your right Lehman didnt have that kind of risk management but everything else is about the same, you couldnt possibly think GS is strategically manageing their positions! If they are so talented why the frick did they have any problems to begin with ?

But i asked that question at the beginning of the week! Give it up... this company deserves to die just like the others if not more so now.
 
Quote from wmb:

Risk Management, hmmm like in the form of GS alumni riddled within the federal offices. Like Henry Paulsen like the head of the new york fed, thats some serious risk management! Your right Lehman didnt have that kind of risk management but everything else is about the same, you couldnt possibly think GS is strategically manageing their positions! If they are so talented why the frick did they have any problems to begin with ?

But i asked that question at the beginning of the week! Give it up... this company deserves to die just like the others if not more so now.
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What problems did they have? They didn't want any fed money in the first place! All banks over a certain size were FORCED to take TARP funds.
 
Quote from krazykarl:

What problems did they have? They didn't want any fed money in the first place! All banks over a certain size were FORCED to take TARP funds.
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I remember an article from December...can't remember what magazine, but I think it was Blankfein himself who was waffling on whether or not Goldman needed the bailout. I think he said something along the lines of "I think we would have survived without it, but I slept a lot easier once I knew it was coming". Maybe somebody else can dig that up.

Also found this: http://www.theatlantic.com/business/archive/2010/02/did-goldman-need-a-bailout/35383/
 
Quote from krazykarl:

What problems did they have? They didn't want any fed money in the first place! All banks over a certain size were FORCED to take TARP funds.
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I'm not 100% convinced that Hank Paulson "forcing" banks to take money wasn't just a cover for plausible deniability later.
Why would Goldman need Buffett's $$ infusion if they were fine all along?
 
Quote from MarketMasher:

I'm not 100% convinced that Hank Paulson "forcing" banks to take money wasn't just a cover for plausible deniability later.
Why would Goldman need Buffett's $$ infusion if they were fine all along?
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That was another point to that magazine article: when Blankfein was pressed on what made him think that Goldman would survive, he pointed to Warren Buffett's $5 billion investment
 
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