Guest Post: Goldman's Blueprint For Dumping Toxic Assets: How These CDOs Were Designed To Fail

"Although Goldman Sachs held various positions in residential mortgage-related products in 2007, our short positions were not a 'bet against our clients.'"

That claim, from Goldman's letter to its shareholders,
is easily refuted. The S.E.C. has brought fraud charges on one of
Goldman deals known as synthetic subprime mezzanine collateralized debt
obligations, or CDOs. While most of these deals remain shrouded in
secrecy, one of them, Anderson Mezzanine Funding 2007, Ltd.
lays out its blueprint in sufficient detail so that we can pinpoint how
and why this transaction's failure was never in doubt.

Europe - The Week Ahead: Greece And The Volcano

"And then the Volcano. Needless to say, at this early stage it is very difficult to say anything meaningful about the effect on the European economy, but here are my very preliminary thoughts (surely subject to possibly significant revisions): First, if the disruption to air traffic is contained to a week or less, then I think the total effect will be minimal. My guess would be that the effect on Q2 GDP would be within a rounding error (of 0.1pc) around our +0.8pc qoq forecast. Off the top of my head, air transportation is no more than some 0.1 pc of European GDP, and one would assume that a lot of what's been lost in the air will be made up in coming weeks. Also, ground transportation is having a field day, as illustrated by the fact that all trains out of Florence was fully booked for the next 3 days and none of the car rental companies had cars available for the next 9 days." Erik Nielsen, Goldman Sachs

Eyjafjallajokull Ash Diffusion Indicates Why Europe Is Panicking, 84% Of European Flights Cancelled

Watch volcanic ash diffusion in super slo-mo, as EuroControl reports: "At the current time, air traffic control services are not being provided to civil aircraft in the major part of European airspace. This includes Austria, Belgium, Croatia, the Czech Republic, Denmark, Estonia, Finland, most of France, most of Germany, Hungary, Ireland, northern Italy, the Netherlands, Norway, Poland, Romania, Serbia, Slovenia, Slovakia, north Spain, Sweden, Switzerland, Ukraine and the UK."

Yesterday Germany, Today UK, Tomorrow The World: Goldman's Response To Lawsuits By Everyone - Q1 Stub Bonuses!

As expected, the line of people preparing to sue Goldman is now longer than the posers who bought the iPad on launch day. Reuters reports that British Prime Minister Gordon Brown, who himself has been in hot water over his much lamented decision to sell UK's gold despite protests from the BOE and likely under the guidance of Goldman and JPM, wants an investigation into the Goldman affair by the FSA, and is saying that impacted UK banks will be considering legal action. Furthermore, GB slammed Goldman after the TimesOnline reported that Goldman will pay $5.6 billion in bonuses for just three months work, including 600 million pounds for London-based staff. Among other things, the ratings-strapped politician, who as recently as ten years ago was doing the bidding precisely of Goldman and its cronies when dumping the gold stash, accused the bank of "moral bankruptcy." We assume is referring to Chapter 11. Of course, that would imply that Brown's hypocrisy should be sufficient for immediate Chapter 7 liquidation proceedings.

If CDS Traders Are Right, France Is Next Up For A Sovereign Shakedown (As Are Spain And Portugal); Greece Long Forgotten

CDS traders were prescient in snapping up Greek and Dubai CDS long before anyone else realized the risk these countries are in (well, more like Goldman selling CDS to some very close clients, wink wink). In exchange for figuring out what it took cash bond holders months to understand, these 'speculators' made a lot of money and in the process got branded as quasi-sovereign terrorists. Well, Greece can sleep well: according to the latest DTCC CDS data (for the week ended April 9), CDS specs have completely deserted Greece, which saw the single biggest amount of Net Notional CDS decrease, to just over $8 billion, a reduction of $367 million in the prior week (which means all the widening in Greek spreads is now, and has been, just cash bond sales, precisely what Zero Hedge has claimed all along). CDS traders are now focusing their attention on the one country which has so far slipped under everyone's radar, yet which we disclosed is more on the hook in terms of Southern European exposure than even Germany: France, with $781 billion in total claims. Should Greece topple the PIIGS dominoes, France will implode. And this is precisely what CDS traders are betting on now, taking advantage of absurdly tight France CDS levels. Also, just in case they are wrong on France, Spain and Portugal, not surprisingly, round out the top three names in which Net Notional saw the largest increase. Also not surprisingly, Japan rounds out the top 5 deriskers.

Financial Lexicon 101: Summary Of Key Terms

Even as Bank of America is preparing to restart securitization and thus provide the single greatest gift to creditors the world over, as this is merely the first step in wiping out/transferring yet more trillions in private sector debt, it has done the public a bigger favor by compiling the following list of key terms for all those lost in the current labyrinth of definitions,acronyms and euphemisms. Since following the Goldman legal plight will require a facility with some heretofore quite complex constructs, the following catalog is a must read for all financial novices.

Germany To Add To Goldman's Headaches, Prepares To Sue Firm

The Pandora's box of the SEC's action against Goldman, which if validated in court will effectively make the issuance of every hybrid CDO product quasi-illegal, will lead to an explosion of lawsuits against virtually any bank that was active in the structured finance space during the housing boom, adding to a fresh round of "non-recurring" charges to bank income statements. Case in point - Welt am Sonntag reports that the German government is considering suing Goldman Sachs, and has asked the SEC for information in its fraud case against the firm. According to the WSJ a spokesman for Angel Merkel said earlier: "First we must ask for the documents, then evaluate [them] and then decide about legal steps." The action stems from the SEC's disclosure the German IKB may have been illegally "taken advantage of" through Abacus, and probably other CDO transactions, leading to losses of $150 million. In 2007 IKB had to be bailed out by the German government, in what some claim was the preamble to banking crisis that is now enveloping Europe (not sure if the sovereign catastrophe facing the EMU can also be blamed on Goldman's CDO transactions, although Goldman will surely also be sued for that sooner or later). We have seen how eager Europe has been to scapegoat "speculators" and other Wall Street actors. We are positive that Germany will surely pursue action against Goldman as it will now provide a vent to pent up popular hatred of how the government has handled the crisis. At the end of the day, even if the SEC's overture is nothing but a pr stunt cleverly orchestrated by Emmanuel Rahm, the unexpected fallout may well be where the real action is.