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The Atlantic Reports That Deutsche Bank Also Sold Paulson-Selected CDOs To IKB
Here comes the next witchhunt: The Atlantic, citing two Deutsche Bank traders, reports that the German bank is guilty of an identical transgression that Goldman (and to a much lesser extent, John Paulson) is in hot water for currently: i.e., DB arranged a deal for IKB designed by JP. Look for DB's stock to drop as expectations for a Wells Notice hit fever pitch. The reason one has not come yet is because, as we reported this weekend, Robert Khuzami has recused himself from investigating Deutsche due to his long tenure there as a lawyer (presumably supervising CDO issuance). The reason one most likely is in the making, is that, as we also reported, Greg Lippmann, or the head Deutsche CDO trader mysteriously departed last week. Look for much more weakness in fins over the next few days.
From The Atlantic:
Goldman Sachs was not the only investment bank selling the complex securities that ultimately resulted in staggering losses for the German bank IKB Deutsche Industriebank. Traders at Deutsche Bank sold similar collateralized debt obligations (CDOs) -- built from credit protection on a portfolio of mortgage-backed securities selected in consultation with hedge fund manager John Paulson -- to the German bank. And like Goldman, Deutsche Bank didn't reveal Paulson's role in the construction of the CDOs. So far, the SEC has not charged Deutsche with fraud relating to these transactions.
Two Deutsche Bank traders who requested anonymity say that Paulson's role, both in selecting a reference portfolio and in shorting it, was never disclosed to any customers taking the other side of the trade on CDO deals. In fact, they never told clients who was on the other side of a trade. The traders cited IKB as one of the customers who bought CDO trades for which Paulson & Co helped select the reference portfolios.
Greg Lippmann, head of ABS trading at Deutsche Bank, was also involved in working with hedge fund clients like Paulson who wanted to short the housing market and bet against the CDOs his bank was selling to IKB. Traders we spoke to who worked on an IKB-Paulson deal think the transaction did not violate securities laws and instead were simply offering each client what they were asking for: two different directional bets on the housing market.
"Deutsche's view was: you're all big boys, you do your own research. Here is what's in the security -- you choose if you want it or not. IKB knew exactly what they were buying," said a Deutsche Bank trader who sold CDOs.
Deutsche Bank's head of communications Ted Meyer said he wouldn't comment on specific client transactions. But he did say that the absence of a third party collateral manager distinguished the Deutsche Bank deals from Goldman's Abacus 2007 deal.
"What distinguishes Deutsche Bank's CDO transactions is that both long and short investors were given the opportunity to select the specific collateral to which they were seeking exposure and mutually agreed on the CDO portfolio. No third-party collateral manager was utilized for these deals, which eliminated the potential for deception with respect to the role of such a manager," Meyer said.
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Yep. Yep. Yep.
IKB and others were supposedly making a killing in the carry trade with this stuff. The higher the yield the more they made. What better to fill a SIV or SPV when there are off balance sheet profits to be gained. Citi got an STD from the same scheme. Goldman just couldn't give IKB enough for a full meal.
They asked for it. They got it. It was not a Toyota.
The Obama plan is to use the ginned up "outrage" to thoroughly take control of every financial transaction. Who is the Rube?
The Obama plan is to use the ginned up "outrage" to thoroughly take control of every financial transaction.
...and if I had to guess I'd say that Obama has every intention of legally cementing the civil right to home ownership and to credit in general. Throw in higher taxes on everything and you get a perfect lose-lose-lose trifecta...a squandered opportunity for legit, common sense reform with everything actually worse than it was before.
Coming soon...Ka-BOOM!
Bravo, Bravo! I have been amazed at how long the powers that be have been able to keep juggling all of these bowling pins, sponge balls, torches, chain saws, hatchets, and assorted fruit. Impressive, as will be the inevitable crash.
Trees don't grow to the sky, and the forest is getting pretty darn tall and dry. If you don't have your peaceful meadow staked out, with your firebreaks in place, then you better darn well hurry up.
http://www.youtube.com/watch?v=tKfsFkb_9fI&feature=related
There is unrest in the forest,
There is trouble with the trees,
For the maples want more sunlight
And the oaks ignore their please.
The trouble with the maples,
(And they're quite convinced they're right)
They say the oaks are just too lofty
And they grab up all the light.
But the oaks can't help their feelings
If they like the way they're made.
And they wonder why the maples
Can't be happy in their shade.
There is trouble in the forest,
And the creatures all have fled,
As the maples scream "Oppression!"
And the oaks just shake their heads
So the maples formed a union
And demanded equal rights.
"The oaks are just too greedy;
We will make them give us light."
Now there's no more oak oppression,
For they passed a noble law,
And the trees are all kept equal
By hatchet, axe, and saw.
Did you write this? Its funny!
This is what is happening in my parent's back yard. They have a big maple and their neighbor has a big oak. The run around trying to saw limbs at night.
No sir, I wish I was that clever, its from the Trees, by Rush (who I am going to see this labor day in Syracuse HELLZ YEAH).
I don't have a speaker at work, but hopefully this link works
http://www.youtube.com/watch?v=TrFc7szmN34
maybe you solved the mystery to the song, since rush is canadian people thought it was them versus us, or commies vs. the west etc etc. maybe it is just about trees!
Rush had a lot of post apocolyptic, cold war stuff. I'm obv a fanboy.
Really? They were all doing it so let's see the SEC sue them all.
Oh, that's not "feasible"? They will just sue a few of them to placate the Sheeple.
The bloomberg Sunday interviews with Jim grant guest hosting was the best. The point made: even if they did disclose paulson as the other side of the synthetic, what would you have done with that information? So gs or db sells you this thing that has an inherent other side of the bet, who gives shit who's on the other side? Maybe in 2010 with paulson being a real name that matters, but 2006?
+1
FROM ONE GOOD GERMAN TO ANOTHER:
http://4.bp.blogspot.com/_wkgIzuqJM0w/S9W1lvOu6DI/AAAAAAAAD-U/8Ui-dc-BUE...
Atlantic's report both corroborates any case for indicting Paulson and also spurs an indictment. In response to Blogger's estimate of Paulson's culpability as "much less so": be two absolutely separate banks culpable for fraud, how could the only common collaborator in the fraud be inculpable?
Lippman was one of the insiders who helped explain the imminent meltdown in structured products in "The Big Short." Actually one of the key insiders who directed a small band of CDS buying heroes.