They concealed it very effectively, so, no, the buyers had no idea. Goldman Sachs is in the business of recommending as well, so they were dishonest in two ways. And they made money at it!
In response to your question here is a little light reading AN;
Goldman vs. SEC… Big problems ahead for the major mortgage banks… Kudos… Signs of a top in stocks… The ethics of not paying your mortgage…
We wrote it. Did you short it?
Goldman eventually admitted it had insured roughly $20 billion worth of subprime CDOs with AIG and had major exposure to the firm. But the New York Federal Reserve and Goldman Sachs never revealed this critical fact: Goldman didn’t merely buy insurance on a bunch of random subprime CDOs. It actually bought insurance on special CDOs it had put together and sold to its own clients. In other words, Goldman knew more about these CDOs than anyone else. Goldman bought insurance on these CDOs because it knew they’d collapse. This is tantamount to building a house, planting a bomb in it, selling it to an unsuspecting buyer, and buying $20 billion worth of life insurance on the homeowner – who you know is going to die!
These facts all came to light because of research done by the office of Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform. These new documents will certainly lead to a full investigation of the Goldman-AIG dealings and the subsequent $180 billion bailout led by the New York Federal Reserve. My bet? Heads will roll. If you own Goldman Sachs, you’d better sell. – Porter Stansberry, February 24, 2010, S&A Digest
Last week, the SEC targeted Goldman Sachs in a civil fraud case. The lawsuit alleges Goldman sold investors a collateralized debt obligation (CDO) linked to the performance of certain mortgages without disclosing John Paulson’s hedge fund, Paulson & Co, helped design the product and was betting against those mortgages.
Paolo Pellegrini, Paulson’s lead mortgage analyst, worked with Goldman to pick a group of mortgages most likely to be downgraded. Paulson & Co then paid Goldman $15 million for the service. ACA Financial, a bond insurance company, made a few changes to the structure of the product. Then Goldman sold these to its clients, who readily bought because of their triple-A rating. John Paulson made $1 billion from his bets against this particular mortgage product, named Abacus. The buyers, which included ACA Financial and the German bank IKB, lost $1 billion.
The idea behind the SEC’s lawsuit is these mortgage securities were fraudulently constructed: They were made to fail. If the SEC is able to prove its case in court, the ramifications for the other banks that put together CDOs will be tremendous. For example, a judge last week rejected Merrill Lynch’s motion to dismiss an MBIA lawsuit over billions in mortgage backed CDOs that MBIA had insured. The judge ruled the insurance contracts were based on the securities’ triple-A rating. Since the triple-A rating might have been fraudulently obtained, the lawsuit should continue. If these suits aren’t settled, the big banks could end up losing hundreds of billions to the insurance companies and other mortgage investors.
SEC has yet to successfully prosecute a major financial case. I will be surprised if there was even a blip to GS’ bottom line. Remember, there were 10 other banks that used similar securities.
And don’t get me wrong - it would be wonderful if someone can successfully prosecute people who have been bleeding the poor sheep - but I believe that GS will take down their enemy and get the girl.
I have no clue what you are trying to allude. Maybe my diminishing reading skills have something to do with it.
Anyway, what I was trying to point out was that there will be no change. Banks do control a significant portion of our lives - our money, our debt and even our predictable behavior. Their alums are in key positions, they also control how legislations are shaped and they may just as well control the entire government. And as I said earlier, SEC case is already shaky - the only thing praiseworthy was the surprise factor that has put GS on the defensive. But nothing much will come out of this prosecution (remember the slam dunk case against Mark Cuban?).
On the topic of tipping the waitress, GS ranked second in Obama’s campaign contribution and Citi and JPMC came in 5th and 6th respectively. There has to be a reason why banks were pouring in all this tip consistently. Let’s see if they get some “additional special toppings” as well. If you remember, when GS and other banks pushed AIG hard and that resulted in AIG being bailed out - these banks got everything back from AIG : 100 cents to a dollar. If the bailout hadn’t happened, GS would be sitting on shaky investments. These are shrewd folks who know how to play the market and people. Doesn’t matter whether it’s a democrat or a republican in control.
GS was advising gamblers on which horse to bet on. problem seems to be that they got some of their advice from a jockey in the race who was betting on another horse…
RV says:
“Not to say “you’re wrong” or anything. But is there a link you can provide that shows the $900,000 that is purported to be the contributions from Goldman Sachs to Obama? And while you’re at it, one that shows they were Obama’s #1 contributor.”
Here’s the link:
http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638
On my pessimism, I would love to detail out why I think nothing will happen, but am short on time. Some other day.
Motivemagus about 14 years ago
They concealed it very effectively, so, no, the buyers had no idea. Goldman Sachs is in the business of recommending as well, so they were dishonest in two ways. And they made money at it!
cfimeiatpap about 14 years ago
In response to your question here is a little light reading AN;
Goldman vs. SEC… Big problems ahead for the major mortgage banks… Kudos… Signs of a top in stocks… The ethics of not paying your mortgage…
We wrote it. Did you short it? Goldman eventually admitted it had insured roughly $20 billion worth of subprime CDOs with AIG and had major exposure to the firm. But the New York Federal Reserve and Goldman Sachs never revealed this critical fact: Goldman didn’t merely buy insurance on a bunch of random subprime CDOs. It actually bought insurance on special CDOs it had put together and sold to its own clients. In other words, Goldman knew more about these CDOs than anyone else. Goldman bought insurance on these CDOs because it knew they’d collapse. This is tantamount to building a house, planting a bomb in it, selling it to an unsuspecting buyer, and buying $20 billion worth of life insurance on the homeowner – who you know is going to die!
These facts all came to light because of research done by the office of Darrell Issa, the ranking Republican on the House Committee on Oversight and Government Reform. These new documents will certainly lead to a full investigation of the Goldman-AIG dealings and the subsequent $180 billion bailout led by the New York Federal Reserve. My bet? Heads will roll. If you own Goldman Sachs, you’d better sell. – Porter Stansberry, February 24, 2010, S&A Digest Last week, the SEC targeted Goldman Sachs in a civil fraud case. The lawsuit alleges Goldman sold investors a collateralized debt obligation (CDO) linked to the performance of certain mortgages without disclosing John Paulson’s hedge fund, Paulson & Co, helped design the product and was betting against those mortgages.
Paolo Pellegrini, Paulson’s lead mortgage analyst, worked with Goldman to pick a group of mortgages most likely to be downgraded. Paulson & Co then paid Goldman $15 million for the service. ACA Financial, a bond insurance company, made a few changes to the structure of the product. Then Goldman sold these to its clients, who readily bought because of their triple-A rating. John Paulson made $1 billion from his bets against this particular mortgage product, named Abacus. The buyers, which included ACA Financial and the German bank IKB, lost $1 billion.
The idea behind the SEC’s lawsuit is these mortgage securities were fraudulently constructed: They were made to fail. If the SEC is able to prove its case in court, the ramifications for the other banks that put together CDOs will be tremendous. For example, a judge last week rejected Merrill Lynch’s motion to dismiss an MBIA lawsuit over billions in mortgage backed CDOs that MBIA had insured. The judge ruled the insurance contracts were based on the securities’ triple-A rating. Since the triple-A rating might have been fraudulently obtained, the lawsuit should continue. If these suits aren’t settled, the big banks could end up losing hundreds of billions to the insurance companies and other mortgage investors.
Porter Stansberry, S&A Digest
CorosiveFrog Premium Member about 14 years ago
…and still the poor get the bad reputation.
WarBush about 14 years ago
You know very well that if these guys are convincted they’ll spend a few months at club fed.
attyush about 14 years ago
@Reasons:
Did you know that Goldman Sachs contributed in excess of $900,000 to the Obama campaign?
attyush about 14 years ago
@DrC:
SEC has yet to successfully prosecute a major financial case. I will be surprised if there was even a blip to GS’ bottom line. Remember, there were 10 other banks that used similar securities.
And don’t get me wrong - it would be wonderful if someone can successfully prosecute people who have been bleeding the poor sheep - but I believe that GS will take down their enemy and get the girl.
attyush about 14 years ago
@Reasons:
I have no clue what you are trying to allude. Maybe my diminishing reading skills have something to do with it.
Anyway, what I was trying to point out was that there will be no change. Banks do control a significant portion of our lives - our money, our debt and even our predictable behavior. Their alums are in key positions, they also control how legislations are shaped and they may just as well control the entire government. And as I said earlier, SEC case is already shaky - the only thing praiseworthy was the surprise factor that has put GS on the defensive. But nothing much will come out of this prosecution (remember the slam dunk case against Mark Cuban?).
On the topic of tipping the waitress, GS ranked second in Obama’s campaign contribution and Citi and JPMC came in 5th and 6th respectively. There has to be a reason why banks were pouring in all this tip consistently. Let’s see if they get some “additional special toppings” as well. If you remember, when GS and other banks pushed AIG hard and that resulted in AIG being bailed out - these banks got everything back from AIG : 100 cents to a dollar. If the bailout hadn’t happened, GS would be sitting on shaky investments. These are shrewd folks who know how to play the market and people. Doesn’t matter whether it’s a democrat or a republican in control.
treered about 14 years ago
GS was advising gamblers on which horse to bet on. problem seems to be that they got some of their advice from a jockey in the race who was betting on another horse…
attyush about 14 years ago
RV says: “Not to say “you’re wrong” or anything. But is there a link you can provide that shows the $900,000 that is purported to be the contributions from Goldman Sachs to Obama? And while you’re at it, one that shows they were Obama’s #1 contributor.”
Here’s the link: http://www.opensecrets.org/pres08/contrib.php?cycle=2008&cid=N00009638
On my pessimism, I would love to detail out why I think nothing will happen, but am short on time. Some other day.