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Goldman's Hudson Mezz CDO Is Now Focus Of Brand New SEC Probe

Tyler Durden's picture




 

Abacus, Timberwolf, and now Hudson, pretty soon there won't be a CDO underwritten by Goldman that is not the object of some civil or criminal legal battle. The FT is reports that the SEC has launched a brand new investigation into Goldman Sachs, this time into its $2 billion Hudson Mezzanine Funding CDO. According to the FT: "People familiar with the matter said that in recent weeks the SEC had been gathering information on Hudson Mezzanine, which featured prominently in an 11-hour grilling of Goldman’s executives in the US Senate in April. The SEC and Goldman declined to comment." It is unclear if Goldman has received a separate Wells Notice for this second probing iteration, but since as Goldman notified its shareholders, these things are immaterial, we won't hold our breath to find out. As was repeatedly hammered during the Congressional grilling of Blankfein and his henchmen two months ago, Hudson is precisely the "junk" deal that AIB was “too smart to buy"which in turn forced Tourre and the other salespeople to keep pushing Eastward to Taiwan and Korea (Marc Faber beware).

As disclosed earlier, Australia's Basis Yield Alpha sued Goldman today for failing to "disclose material information knowing that, by this omission, information that they did disclose was rendered misleading." That lawsuit opens the way for every single investor who ever bought a CDO from Goldman as a primary issuer (not in the secondary market). As we have pointed out previously, Goldman and BP will soon be competing over which firm has more active lawsuits against it. On the other hand, Goldman may offset some costs by IPOing the largest corporate litigation firms, as their partners will soon be rolling in the dough. While completely impossible, the mutual conflicts of interest in the risk factors of such a prospectus would make for a comic book all on its own.

As for Hudson, some more information from Goldman:

Goldman went “short” on Hudson Mezzanine, buying protection on the entire value of the CDO, according to internal documents. Less than 18 months later, as the US housing bubble burst, Hudson Mezzanine’s credit rating had plunged to junk status, causing losses for investors and enabling Goldman to collect on the insurance.

Legal experts said that inquiries into Hudson Mezzanine were likely to focus on whether Goldman provided investors with adequate disclosure. In a marketing document, Goldman stated its interests were “aligned” with investors because it would buy equity in the CDO.

In legal disclaimers, Goldman also said it would buy protection on the security, but it did not specify how much.

Carl Levin, the senator who chairs the sub-committee investigating Wall Street’s actions during the crisis, seized on the “junk” reference repeatedly during the hearing when questioning Lloyd Blankfein and other Goldman executives.

The oddest thing is that Goldman still staunchly opposes a settlement in any of these cases, which is reasonable, as any case which has an even remote claim will then rise up asking for at least partial remuneration, and Goldman will have to oblige. On the other hand, should Goldman end up losing even one criminal case, Lloyd Blankfein's duplex at 15 CPW will very promptly be on the market, with a Bernie Madoff-esque of cache. We hear $30 million buys a whole lot of cigarettes at any minimum security facility.

 

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Wed, 06/09/2010 - 19:40 | 404795 knukles
knukles's picture

"Can ya hear me now?" says Congress.  "Y'all don't dare suggest you be doin' my work. God's Work is Mine and Mine Alone."

Wed, 06/09/2010 - 21:43 | 404982 LeBalance
LeBalance's picture

who is the owner?

Wed, 06/09/2010 - 19:44 | 404807 Rainman
Rainman's picture

Such is life for all bucket shop managers. Those pesky marks keep complaining they've lost all their money.

" Hell, they were sophisticated enough to know we are a bucket shop " !!

Wed, 06/09/2010 - 19:49 | 404813 hamurobby
hamurobby's picture

Does JPM do any wrong, or are they exempt from 1913 on?

If Congress keeps probing the monster, the markets will get flashed again.

Wed, 06/09/2010 - 19:52 | 404816 Howard_Beale
Howard_Beale's picture

Goldman is becoming the BP of financials... Fuckers deserve it.

Wed, 06/09/2010 - 20:25 | 404853 Implicit simplicit
Implicit simplicit's picture

Commonality: BP lays waste to earth's bounty while GS lays waste to earthlings' bounty

Wed, 06/09/2010 - 20:23 | 404857 Debtless
Debtless's picture

+2

Wed, 06/09/2010 - 20:30 | 404872 M.B. Drapier
M.B. Drapier's picture

And they won't even have to change their board.

Wed, 06/09/2010 - 20:33 | 404878 ZeroPower
ZeroPower's picture

Or did BP become the goldman of the oils?

Wed, 06/09/2010 - 21:18 | 404936 Spitzer
Spitzer's picture

BP had an accident, GS just fucks people for a living. There is a big difference unless you happen to be David Suzuki

Wed, 06/09/2010 - 23:49 | 405220 Howard_Beale
Howard_Beale's picture

BP had an accident

HAHAHHAHAHHAHA

They have more accidents than Goldman has CDOs

Wed, 06/09/2010 - 20:28 | 404867 M.B. Drapier
M.B. Drapier's picture

Hudson is precisely the "junk" deal that AIB was “too smart to buy"

How smart and moral did you have to be to turn down Hudson? Conveniently, two reports out just today shed light on this question. The answer is: not very. But it does help if you are gorging yourself on a housing bubble at home.

Wed, 06/09/2010 - 21:19 | 404938 Rick64
Rick64's picture

Piranhas attacking the giant squid. You gotta love it. All we need is a little blood in the water.

Wed, 06/09/2010 - 21:46 | 404986 LeBalance
LeBalance's picture

Now we know why t-porn exercise is standard practice at the SEC.  It is so they can be ready to play "NIN: Closer" roles with clients.

Wed, 06/09/2010 - 22:12 | 405042 dcb
dcb's picture

I can only hope for a trial. More dirty Laundry. It was the xero hedge article on goldmkan prop desk trading a long time ago that conformed my suspicions they were in fact behind the mess.  Get the prop desk records. I am sure they analysts were talking peak oli near the top of the bubble. All the while the firm was short.

Look this isn't going to turn out to be isolated. It is a pattern of the way the firm does business.

Wed, 06/09/2010 - 23:40 | 405209 Mitchman
Mitchman's picture

All the talk about SEC investigations is all wonderful teenage petting with no "goods" delivered. Let's see real charges filed by the SEC. Let's see well thought through suits brought before the courts. Everything else is just mental masturbation. Pleasant. But essentially useless.

Thu, 06/10/2010 - 01:36 | 405312 dcb
dcb's picture

Why should goldman settle. it is after all stock holders money and doesn't come out of their pocket.  Hell if I had free awers wih unlimited to spend I would do it too

Thu, 06/10/2010 - 05:14 | 405452 dcb
dcb's picture

Someone one reall needs to be looking into the futures market this is where the manipulation is happening now. if you haven't figured out the chart pattern yet I hope you have. it is in effect designed to really screw you as a trader. today the futures I predict will be high at the open.

yesterdau was the same as the 6/9 os the same as 5/26

6/8 was 5/25 today 6/10 should be 5/27

nobody finds the folow through on futures strange. we finish at the low, they open higher in asia

goldman is doing the same thing they do all the time. came out with new euro estimates and look at the action on that. Look at the candel stock pattern from 5/20

Look I bought some untra shorts at exactly the right time yesterday. didn't selt them bacuase of the way we finished the  day. didn't add. the market is now being manipulated in a different way to avoid being seen as easily as before. happening with futures.

 

Asia goes up yet europe opened down? this made no sense. a very big scam is being played on us.

Thu, 06/10/2010 - 06:30 | 405494 John McCloy
John McCloy's picture

  The futures trick was one of their favorites last year. Now they get to pretend that yesterday which was actually fair volume and a key reversal did not occur. A few of the momentum traders and edgy bears might say, "Alright..this market keeps fighting back and will not stay below 10,000 maybe i will just go long for a trade"

  See that is the goal. The goal is to squeeze shorts. It is essentially the only way the banks can make money anymore but they have already squeezed shorts to death from last year until early this year and each squeeze is less effective. All the garbage the Fed & Government is spewing about a recovery does not seem viable with the market falling. 

This is the only thing they can control. They cannot create jobs so they control the markets. They think they are doing a noble service teaching those "dangerous" shorts a lesson but they are only once again making the problem increasingly worse. Many have up on this market long ago because they have no desire to participate in controlled markets especially when all of their educational backround is telling them we are in a depression. Simply because the govt says, "The recession is over, we have a recovery and jobs are returning look at GDP" does not make it true since it is reliant upon artificial forces from stimulus that cannot be replicated. 

    That is why we had that ludicrous run up in March because it was a complete meltup on no volume, no shorts and false prices all around. That is why they are furiously fighting to keep the dow from remaining below 10k. They are terrified and are hoping once again they can wear down shorts and convince them to just get long for a quick trade and alleviate remove concerns that we are headed back to March 2009 levels. They basically try to cheat and the Fed is complicit. 

   Keep in mind if the Fed has been buying stocks all the past year what kind of losses would the Fed holdings be facing? Who knows..we cannot see those trades. Wall Street and the Fed are fighting like their lives depend on it because their existence does. Why this will fail in my opinion is that there are no buyers remaining who have not already been sucked in the past year and only the Fed & Big 4 attempting to ramp the markets but the selling opps are shrinking and the markets march relies ONLY ON NONE OF THEM breaking the covenant not to sell for years from now "when" the markets return to their previous levels. 

   Lawsuits, populist anger, no jobs, fraud investigations, criminal investigation and an eroding economy will ensure that does not happen. When you factor in the U.S. dollar cookie monster in the Gulf you only hasten the arrival. Having faith in both Wall St & the government orchestrating an operation of this size and basing your investment and trading on such premise is a lesson anyone watching these clowns in the past decade should have learned long ago. Not only will they fuck it up but they will manage to make it worse.

Thu, 06/10/2010 - 06:08 | 405485 John McCloy
John McCloy's picture

Just making markets baby..making markets and providing liquidity. 

  Sounds very familiar to the Italian delicatessen front that sells prosciutto, provolone, lotto and uh yeah we also run numbers, plan truck hijackings, brothels and drug trafficking. 

   Goldman is a modern day organized crime family. They have political protection like the mob, they extort not just the local neighborhood but the entire nation and now the world, similar to Hoover the government essentially pretends organized financial crime families are a figment of our imagination. Nothing less than R.I.C.O. charges should satisfy the American public. Oh that is right ...they do not know. We have public scolding hearings and headlines to allow the people to believe anything is actually transpiring. 

 

Thu, 06/10/2010 - 07:56 | 405555 ToNYC
ToNYC's picture

Failed States incubate underground crimes; it's not a racial attribute. The Irgun had lots of collateral damage in persuading the Brits to quit their mandate. Hyman Roth couldn't have been a made man; but it mattered little if he always made money for his partners and was a producer. The RICO indictees list includes Lloyd's boys. Keyser Soze is in the house.

Thu, 06/10/2010 - 10:42 | 405863 b_thunder
b_thunder's picture

i don't care for Blanky.  who's goign to go after Hank, Timmy and Ben - those who stole/printed trillions and funneled them to Wall st. buddies of theirs?

 

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