Factbox: How Goldman's ABACUS deal worked

Comments (10)
Voteoutincumb wrote:

This is mortgage & securities fraud, also insider trading. all invloved should be in jail, be heavily fined.

Apr 16, 2010 5:51pm EDT  --  Report as abuse

I heard Wells Fargo subprime was left out of the structure because they were too high quality

Apr 16, 2010 6:28pm EDT  --  Report as abuse
Jos5319 wrote:

The legal loophole still hampers the SEC from retrieving the money from John Paulson, even if the SEC wins this one.
The legislators need to act fast.

If a baseball franchise influences the players so that the team loses, and, in the meantime, bets against the team. Everybody knows it’s a crime, but the analagous betting behavior by the financial sector is not specifically codified as a “crime” yet by law.

The SEC can only prosecute under the misrepresentation and failure to disclosure law. So John Paulson cannot be charged and the profit pocketed by his Hedge Fund is not retreivable by this action.

Apr 16, 2010 7:48pm EDT  --  Report as abuse
zippity wrote:

And the GOP says “Hell, no. We don’t need no stinkin’ regulation and reform bill!” Maybe the coppers rounded up the whole damn mafia in one raid. Certainly hope so. Wonder how Glen Beck will spin this fairy tale? How was Goldman just doing what was “good for America”? Fox news writers will be sweatin’ bullets over how to twist this story line. Go for it!

Apr 16, 2010 9:15pm EDT  --  Report as abuse
pwrbkg4 wrote:

I don’t get what all the fuss is about, can someone explain it to me? The way I understood it, 1. Paulson wanted to bet against a pool of really crappy bonds 2. Goldman created these pool of bonds 3. IKB and ABN decided to take the other side of Paulson’s bet.

The bonds are rated BBB, so everyone knows these are not perfect. If anything, IKB and ABN are at fault for being idiots in taking the $1 billion exposure. If not, then it’s the rating agencies fault for rating the pools so high. Either way, I don’t see why Goldman should be blamed for anything…

I guess to use the baseball analogy… 1. Paulson wanted to bet against a a team made up of the worst players in baseball 2. Goldman created this team with the worst ball players 3. IKB and ABN took Paulsons gamble that this team will lose…

IKB and ABN knew that this was a team of losers, and they still took Paulsons bet… so isn’t this just IKB and ABN’s fault for being dumb?

Apr 16, 2010 10:40pm EDT  --  Report as abuse
psy17 wrote:

It is going to be hard for the SEC to get a conviction. Like pwrbkg4 implies, Goldman acted as market maker and Paulson wanted to short while IKB and ABN wanted to go long.

Just like your usual equity short seller and long buyer to me. I guess what the SEC is trying to get GS on is that they never disclosed that Paulson had a say in the package of bonds, but the buyer wouldn’t usually know who the seller is in the stock market. And would it matter that Paulson was short, I mean the bonds were BBB for god’s sake, IKB and ABN should have known better and the fact the bonds were such garbage, somebody was bound to be shorting it whether it was Paulson or not.

Apr 16, 2010 11:13pm EDT  --  Report as abuse
Mega wrote:

If Paulson had been the sole collateral manager, the suit would definitely have merit. But asset sourcing was a core part of ACA’s business. They really had no excuse for their ignorance, if that’s what it really was.

Apr 16, 2010 11:20pm EDT  --  Report as abuse
nightlight wrote:

‘pwrbkg4” coment sums it up beautifully.
Most mortals will see this rather one sided – someone made hundreds of millions from this, while others lost hundreds of millions and by that fact the winners must be guilty. It would appear that imcompetance is not as evil as ingenuity; I would indeed beg to differ.

At first sight it does look like a bit of a scam, but when you consider that ACA had equal information on the stability of these mortgages as Goldman, or indeed Paulson, then it seems that it was a level playing field. Perhaps ACA’s greed and incompetance should be put in the dock. Neither Goldman or Paulson provoked people stopping paying their mortgages – all they did was forsee it, and that insight is worth it’s weight in gold as it proves who the real professionals on economics are.

If I were a shareholder in ACA stock I would ask that management be hung, drawn and quartered, twice!

Apr 16, 2010 11:53pm EDT  --  Report as abuse
riadelsayed wrote:

The main reason for accusing Goldman with fraud is due to the fact that disclosure of certain information that should have been disclosed to these banks did not take place.The issue isnt in the transaction themselves.

Apr 17, 2010 5:21am EDT  --  Report as abuse
nightlight wrote:

‘riadelsayed’, what information; that betting on a three legged horse can seriously damage your wealth?

If a bank can be mislead one could argue what the hell is it doing in this business.

Apr 17, 2010 5:39am EDT  --  Report as abuse
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