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Goldman's Hit List: Bear, Moody's, NatCity, PMI, WaMu And Capital One

Tyler Durden's picture




 

As Bruce Krasting disclosed yesterday, Goldman's Josh Birnbaum "slipped" when disclosing the firm's prop equity positions, in listing the companies his firm was actively shorting. We hope none of these were naked shorts as that would not reinforce the case of prudent risk management by Goldman's discount window-accessible hedge fund (in other words, the entire firm). Today, via the full exhibit list, we learn that in addition to Bear Stearns, in July 2007 the firm, via Josh, was also actively shorting a variety of other mortgage-related firms at the Structured Products Group via puts, which in addition to Bear, included Moody's, National City, PMI, WaMu, and Capital One. The firm only had a micro S&P long offset. As the list demonstrates, the firm had a big delta short in fins offset with no financial longs, thus refuting Josh's testimony that this was a "hedge" when in reality this was nothing than a directional short bet on fins. What is more troubling is that Josh was planning on expanding the list to a whole slew of other firms, and specifically competitors, most of which eventually going under: including Lehman, Merrill, and Morgan Stanley.

We are confident that sooner or later AIG made the list, if not so much on the equity short side, as long CDS. If anyone wants to make the conspiratorial case that Goldman may have had the upper hand on these firms by knowing their liquidity situation and profited from it by shorting them as each bank in turn experienced a bank run, this could be a good place to start. It also begs the question if Dodd's worthless bill has anything to see about predatory practices by Wall Street firms which actively short each other, potentially leading to a destabilization of the system.

 

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Wed, 04/28/2010 - 09:18 | 321471 buzzsaw99
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We don't want the shorts to win.

Hank Paulson

Wed, 04/28/2010 - 09:19 | 321473 Cursive
Cursive's picture

Can't wait for some Goldman apologist or other bulltard to explain to us Cassandras how there was really nothing wrong in any of this.  GS should be shedding clients heavily now.

Wed, 04/28/2010 - 13:36 | 322152 knukles
knukles's picture

Watcha mean?  They told me that it was all a misunderstanding and I had nothing to worry about because thay'd never do that to me, anyway.  It's cool.

Wed, 04/28/2010 - 09:20 | 321475 Cookie
Cookie's picture

Josh was so smug it was unbelievable, love to see him taken down a peg or 10

Wed, 04/28/2010 - 10:22 | 321636 asteroids
asteroids's picture

I wonder if he had any had in the short selling band that existed before the crash.

Wed, 04/28/2010 - 09:22 | 321478 JW n FL
JW n FL's picture

**** “This is a firm wide report. I can’t determine if this is my department’s short position or not.” ****

**** "Quoting:" **** Josh Birnbaum (co-head of the Structured Products Group (“SPG”)

and your question is whether Goldman Publicly Shorting Bear to the tune of Multiple(s) of 100 of millions if not Multiples of Billions Caused Lehman like distress?

**** "Did the (admitted) shorting of BST in October, November and December by GS lead to the collapse in March?" ****

**** "Quoting: " **** About the author: Bruce Krasting

Well Bruce, the fact the Goldman killed everyone off that Goldman could afford to kill.... thru any and all means necessary, is a well known fact. Now how do you prove intent, in court... without Blankman signature on a document describing said push?

You don't.

 

Besides Bruce... insn't the real issue that Bush dumped 50% to 100% more cash into the ugly truth loan machine that the Liberal Democrats?

To what end? why would he pump up the money and then short the Program?

What could be the result of Government cut backs in the space? the fail safe was gone for all of those players.. I think its funny that people have skipped this fact completely... to hear Obama tell it, Bush was a great guy and we should continue down his path.

LMFAO!

 

That was my answer to Bruce... this is the same answer I will give here as well...

Wed, 04/28/2010 - 09:23 | 321479 Duuude
Wed, 04/28/2010 - 09:25 | 321482 doublethink
doublethink's picture

 

Dick Bove on GS

 

"I think it's a $200 stock. I think the company's earnings are very good, I think you should own it, I think it's a tremendous opportunity."

Read more: http://www.businessinsider.com/bove-the-senators-overplayed-their-hand-goldmans-heading-to-200-2010-4#ixzz0mOuxdaHF
Wed, 04/28/2010 - 09:38 | 321485 Mercury
Mercury's picture

Oh my goodness Goldman was shorting financial companies whose underlying businesses were busted? Isn't there a law against that?

I happen to think shorting rules could stand to be a bit tighter but hard work and being right should remain legal. And there's no law that says B/Ds have to be aligned with all client positions all the time.

Besides, if you're in the financial services business and you obviously won't short your own stock, shorting other financial stocks amounts to a hedge on the overall business no matter what else the case may be. That wasn't Birnbaum's assertion but it is nonetheless true.

Similarly, if you make money on assets under management you should always be long some benchmark index puts bcause if the market tanks there goes your meal ticket.

 

Wed, 04/28/2010 - 09:41 | 321514 FEDbuster
FEDbuster's picture

Must watch three part video explains it all:

http://www.youtube.com/watch?v=xUKSU1qahgE

Crimes were committed, but never prosecuted.  No one is that "lucky".

Wed, 04/28/2010 - 10:09 | 321590 Mercury
Mercury's picture

Dumb rules get exploited by smart people. Regs surrounding the shorting of equities were getting more lax during this period.  You shouldn't be able to short the whole damn float or anything near it like that.  Naked shorting was way to easy and too legally fuzzy.  Goldman probably played dirty pool but if Bear wasn't already in deep shit and shorting regs were more sensible, Bear wouldn't have folded.  And please let's not pretend that FNM and FRE are only disasters because of naked short selling although...funny how the government only got tough on the rules when their asses got close to the flames.

As I said elsewhere, if Bear really was solid they should have retaliated by buying their own stock. In the low single digits they could have taken the whole company private if there was actually any there there. Even with those dumb regs the mechanics of being short can still work against the short seller in an ugly way and Bear could have exploited that if they weren't already so compromised.

Wed, 04/28/2010 - 10:25 | 321647 ghostfaceinvestah
ghostfaceinvestah's picture

I agree.  Plus, nothing prevented Bear from putting on these same trades.  In fact they DID put on these trades, but senior management decided to take off these trades too early.

If anyone should be hung out to dry, it should be the stupid mutual fund managers who were holding these names, and in some cases even buying secondary offerings (e.g. WaMu).

Wed, 04/28/2010 - 11:51 | 321848 Mercury
Mercury's picture

Bill Miller at Legg also got killed in BSC.

Wed, 04/28/2010 - 09:30 | 321491 monmick
monmick's picture

As I recall, his testimony was that that was a hedge against GS's inventory of RMBSs...

Wed, 04/28/2010 - 10:03 | 321568 tip e. canoe
tip e. canoe's picture

they should just bought some FAZ...oh that's right, they're direxion's primary counterparty...silly me.

Wed, 04/28/2010 - 10:07 | 321584 sweet ebony diamond
sweet ebony diamond's picture

i am losing track of the number of Goldman faces.

Wed, 04/28/2010 - 10:09 | 321587 Bruce Krasting
Bruce Krasting's picture

On Wall Street you always press a winning bet. This list of shorts was from July 24th. There is the "target" list of additional shorts. You can be sure that the hit these names as the year progressed. The question is how big were they toward the end of the year and during the 1stQ.

My guess is that this is the "big short" that saved Goldie and killed everything else.

Wed, 04/28/2010 - 10:13 | 321602 BlackBeard
BlackBeard's picture

This is bad for business.  Even if they own the whitehouse.

Wed, 04/28/2010 - 10:14 | 321609 ghostfaceinvestah
ghostfaceinvestah's picture

Interestingly enough Bear Stearns had similar positions on, and decided to take them off.  This wasn't specific to Goldman.

I think the bigger question is, what idiot was long these names?  Ackerman had demonstrated the hole in the MBIA business model years before it blew up, but still some stupid mutual fund manager held it in their portfolio.

Also, if you read the book The Greatest Trade Ever, Paulson was initially short some of these names, but despite obvious signs the housing market was cracking, their share prices still rose.

If anyone deserves blame, it is the stupid mutual fund managers who buy and hold crap companies like these.  And guess what, they are at it again.

Wed, 04/28/2010 - 10:19 | 321625 facka
facka's picture

The hedge defense doesn't work for GS. In theory a hedge is established to directly and proportionally offset risk of a long position. As soon as the "hedging" position is established as non-nuetral, the hedger takes a directional bet.  For any profit gained by GS from a counter-short "hedge", we must call a spade a spade and reveal a non-nuetral hedge as a directional bet.  In this case traded on inside information that the security was not AAA. That is where the fraud comes in.  GS place a directional bet on what they knew to be true, that the security was rated too high and must fall.  It is like taking candy from a baby.  Just sayin.

Wed, 04/28/2010 - 10:22 | 321639 Kurtieboy
Kurtieboy's picture

Believe me, I have no sympathy for the squid, but I have to call a spade a spade. This is a fucking witch hunt.

Wed, 04/28/2010 - 11:23 | 321773 John Self
John Self's picture

+1

Wed, 04/28/2010 - 10:37 | 321680 Rick64
Rick64's picture

The government hypocrisy is at all time highs as usual, I wish they had an index for this we would all be rich. The government in collusion with these institutions encouraged this behaviour by their corrupt selfserving legislation or lack of real legislation. They should be included in the same investigation of these institutions.

Wed, 04/28/2010 - 11:05 | 321736 dcb
dcb's picture

I suggest folks take a look at this clasic zero hedge article:

http://seekingalpha.com/article/135785-goldman-sachs-why-aren-t-trading-profits-raising-any-red-flags

pay particular attention to the quantity being traded by the goldman prop desk as a percent of the nyse. note how the action correlates with strange market action. remmebr the time down day after day jan into march.  draw your own conclusions about what the goldman desk did. It's clear to me. as i recall that quarter they had somethng like to loosing trading days. to me they drove the market down day afeter day after day. clear as hell to me. but you make your own conclusion

Wed, 04/28/2010 - 11:08 | 321742 dcb
dcb's picture

can anybody say naked short!!!!

they have the trading records who was selling more shares of things han in circulation when shorting at times!!

Wed, 04/28/2010 - 11:42 | 321818 dcb
dcb's picture

I'm not saying wall street has to live like saints, but to have the biggest most important firm with the most connections actively acting to destabilize the entire economy is insane. if china did it to us we would call it economic war. there are some imits to the pursuit of profits. if Osama did it we'd call it terrorism. no goldman did it.

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