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Goldman Discloses Its Exposure In Abacus Was In The Supersenior Abacus Tranche
From the call. The firm also points out that its total losses on Abacus were in fact over $100 million, not $90 million as previously noted. And it still hammers home the idea that it had "skin in the game" - how about the whole AIG bailout that resulted as a function of Goldman hedging its general CDO exposure with the insurer via CDS?
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Re the Goldman loss: was the loss from the underlying mortgages that it already owned?
Here's the other question about that whole "skin in the game" argument? Why was the fabulous Fab promoted from VP to Executive Director after putting Goldy in a money-loser? Or was he credited with getting the $15 million fee and some Goldy trader kicked to the curb for investing in the "monstruosity"? I HOPE the regulators (after hoping their not corrupt) have enough sense to add up ALL the ins and outs, all the strands in old Goldy's head, ALL the profits and losses from these deals, to demonstrate to the jurors the extent of the scam. I mean, Goldy's making money SOMEWHERE. And they bragged about making it from shorting mortgage monstruosities. Because of their exceedingly excellent "risk management". So why did they go long this one? Just so they could structure some sort of insurance contract? Was the $100 million they lost a "loss leader" to get $1 billion on the other end?
To answer your questions:
a) "Long" (but fully hedged) on the supersenior tranches to provide "cover" to make the lower levels salable ("Goldman is long on this!) and help defray the costs of the CDS's;
b) Generate "insurable interest" (as if ACA or AIG really cared);
c) Whole idea was to get a "loss leader" - invest $100MM to make $1B that's an absolute sure thing? Even the Swordfish can raise money for a deal like that.
Rumor also has it that so eager was The Squid to get its mitts on this that it even advanced Paulson the money for the equity stub on a non-recourse basis , as JP was negotiating with several different groups of banksters at the same time and it wanted to lock up the deal....
( I saw that on another blog but wrote down the link on a sticky and can't find it).
So, between fees, advances, CDS premiums, and minor interests retained, it could add up to $100MM... a 10:1 return on investment, I'd say.
In fact, that "loss" just might save their ass in court...
KrvtKpt laughing swordfish
DKM trading division
They keep repeating this line. Has Goldman stated it was net long on Abacus or given details on its hedges? Is anyone asking on the call?
Imagine a guy who fiddles his electricity meter, but instead of making it go slower, he accidentally speeds it up so he ends up with higher bills.
He can't be guilty of breaking the law, because his bills are higher (according to Goldman logic)...
When I totalled my car, I lost £5000 on it. The fact that was insured is an entirely separate issue, and that overall my finances were recouped shouldn't be considered when discussing this matter.
However, what if your plan was to total the car to get the insurance money knowing that the insurance money would be worth more than the loss on the car?
It is amazing that these guys who are always perfectly hedged to not incur any losses (for instance, AIG), but did not hedge on this one. This company sounds more and more like Enron each passing day. They conveniently appear perfectly placed, depending on the context.
Goldman supposedly loses $90M-$100M with its left hand while it makes $1B with its right hand. Not that I even believe the $100M loss until it is independently confirmed (not by E&Y mind you), but this is a classic misdirection ploy. All street criminals know it well.
Does Goldman actually and honestly think that anyone in the entire world believes a word they ever say as corrupt as they are???? These guys have no shame whatsoever. What is worse is people invest in their stock and put money with them at all. People need to wake up around the world and especially in the U.S. and get their money out of these types of institutions so they will go out of business. Our country doesn't need these types of crooks having so much power.
You may remember the talk about Madoff. Everyone knew that he was doing something dishonest. They just didn't know that it would them holding the bag. It's the same thing with GS. People may still invest with them not out of ignorance of their corruption but because of it. They figured that GS is a good bet because of the company's influence on government. Hell, they may still be right. I wonder if this recent legal action could just end up to be an attempt to appease people who are angry at Wall Street.
Exactly Cursive, the house will gladly lose a few hands when they know the outcome of the game with 100% certainty.
So, are they just market makers? Or, are they market participants?
The two should never be mixed in the same market.
The discovery in the SEC civil fraud case should be world class entertainment!! Goldman's legal team will be working overtime to limit access inside the tangled web, where everything seems interconnected.
tossing a penny in the kitty does not constitute "skin in the game." It may appear to look like they're a legitimate participant but the amount is only a token, it has no meaning, it's only window dressing.
Who on this board is smart enough to do some analysis on what Paulsons downside was if he was wrong...did he have the opportunity to lose the same amount of money on this or was there time value of money or other wierd expriations that really made this thing rigged?
That is what can blow this open...What was the upside for the non-paulsons vs the downside...
Wish I could lose $90 million the way they do ... I would still have $1 Billion left over
Okay, loss at over $100 million. How much was the gain ? Must be in the billions. These guys talk about only one side of the equation.
The "smart" trade back in seven was long the super senior, short the crap.
Looks like GS got nicked here, along with many others.
You need to watch Goodfellas to understnad how these people think.
true dat
Doesn't matter, still pocketing 5 billion + in bonus
GS had skin in the game the same way as if they are a casino hosting a poker game and 7 of the 8 players at the table are casino shills working for and with the house. Poor 8th player doesn't have a chance and is never even going to know what hit him. Of course some of the shills lost some of their chips in order to entice the sucker all in, so the casino can say truthfully, "we had some losses on that game."