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Guest Post: Is Abacus 2007-AC1 Unique?
Submitted by Jim Bianco of Arbor Research
In the video below, it appears that Steve Liesman of CNBC has access to deposition or other facts in the SEC case. Perhaps he has been talking to Paolo Pellegrini, Paulson’s former head trader who is believed to be a key witness for the SEC. We have found no one else that is reporting on case specifics beyond what was in the SEC complaint.
Liesman reports that the Abacus 2007-AC1 deal (pitchbook) was somewhat unique in that it was Paulson’s only CDO that used a neutral third party manager to select collateral (ACA management) or “bespoke” deal. Pauslon did other CDO deals where they picked the collateral directly and it was disclosed as such. What is not clear is if Paulson’s economic interest in those deals failing was also properly disclosed.
The implication is if Goldman loses this case it will not lead to a precedent that will spread to many other CDOs.
Liesman is also reporting on the collateral selection for Abacus 2007-AC1. Paulson originally proposed 123 deals be included. ACA rejected 55 of them. Then Paulson expanded his criteria to find more deals. ACA and Pauslon went back and forth until enough deals were included to satisfy rating agency criteria to get the desired ratings for the CDO.
As we interpret Liesman’s words (feel free to disagree), ACA was not tossing out deals because they thought they were bad for CDO buyers, but ACA was using its expertise to game the rating agencies to make sure the deal got the desired credit ratings to make it work.
Liesman also reports that “someone close to Pellegrini” says that ACA selection criteria “stacked the deck” against Paulson’s short position therefore implying that this deal is not as fraudulent as it appears. They also point out that ACA “took down” (we believe he means wrote protection against) $840 million of the $1.1 billion deal. What is not clear is if ACA did this to get the deal done and then “re-insured” this exposure with a firm like AIG right after it closed.
If you are interested in the “inside baseball” of this case, this four minute interview is worth a look
Finally, the following video is a conversation with Josh Rosner, managing director of Graham Fisher, and Jesse Eisinger, a reporter with Propublica. It was one of the better and more informed conversations about this case.
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i am sorry. i have sworn off the subjective LIESman for life. he is NO journalist, he is NO economist, and he reaks of the criminal,or rather he reaks of the desire to defend the criminal. you dissapoint me LIESMAN. you are no santelli!
What do you mean that Liesman is no journalist. He is a proud graduate of the B.A. program in English from the State University of New York, Buffalo. He also went on to get a one year certificate (a nine month Master of Arts) from Columbia school of journalism where he took courses such as Arts and Culture along with two seminars in Business and Economics - which I suppose qualifies Mr. Liesman as an economist.
You got it Jimmy, plus the assumptions "tailoring" and credit risk models "adjusting" for specific deals to satisfied specific "chains" of ratings which could be marketed to suckers (investors) that chases yield
Jim Bianco of Arbor Research seems to think that Steve Liesman has credibility.
I think not.
"used a neutral third party manager to select collateral (ACA management)"
Denninger reports that the head of ACA is/was married to a hi-up at GS
Indeed, talk about a "neutral third party"
Senior Goldman Exec Is Married to Former Head of ACA
http://www.huffingtonpost.com/vicky-ward/senior-goldman-exec-is-ma_b_542154.html
Yuri aka "Steve" Liesman is a first class buffoon
Steve Liesman reeks of sperm.
Yes.
Looks like a few small chits have been called in to CNBC for "having access". First Cramer to buff Goldman, and now Liesman to buff Paulson. I thought I saw just a hint of shoe polish in Liesman fingernails (not to demean that honest trade by any means)
Pellegrini was NEVER and i repeat never Paulson's head treader. When Paulson gave him a job he was given a role of entry-level analyst and Pellegrini stayed in that role for the whole time he was employed by Paulson. It matters little that he conceived, structured and managed the trades. He was given the job in the first place simply because Paulson remembered that Pellegrinis analytical skills were probably the best on Wall Street. Oftentimes Pellegrini felt abused, ridiculed and put down by some of the people working above him in Paulsons hierarchy and Pellegrini left shortly after Paulson paid him his 175 million cut of the gains from the trade which was entirely Pellegrinis brainchild. To drive my point even further Pellegrini meant to leave the fund even before the trades were unwind but stayed only because his GF persuaded him to and because Paulson begged him to stay in case the trade goes wrong and he has some explaining to do to his clients. For you who dont know this Paulsons fund was conceived as M&A fund, not a credit fund or debt fund. When Paulson began allocating wast percentage of AMU towards CDOs, CDS and other derivatives he was bombarded with calls day in day out by his clients who threatened to withdraw the money if he continues to follow the same trading strategy. The only thing that saved Paulson is the timing of the collapse and some street smarts employed by him and Pellegrini to speed things up. And from that, children, the ABACUS deal was born.
@CheekyB
That was very interesting background. Thanks.
No problem Jesse.
I can not strongly enough recommend Greg Zuckermans book "The Greatest Trade Ever" in which he detailed the situation regarding what i have mentioned in my previous post. It is a great, easy to read book. If you dont want to buy it just google the name of the book and add pdf at the end of your search. There is couple of sites where you can DL it free of charge.
Got almost all the way through it... DOW is up (Cramer is gloating)! Nothing going on here folks... just a little one act play used to set up the presentation of the (watered down) Financial Reform Bill... when do we find out GS shorted their own stock Friday?
Expect more exculpatory news over the coming weeks, blasting GS stocks back to new highs!
When they 'round up the usual suspects i expect they'll bring this 'Don' in for questioning.....wouldn't mind seein' him as tiger chow...I mean, where is this guy? Where's the frikin' money? All liesman does is obfuscate !
http://www.insurancejournal.com/news/international/2004/05/04/41858.htm
All this shit comes from my back yard....the U of C,,,,,thanks rockefellers!
Can ZeroHedge find the actual "offering circular"? Goldman's attorneys claimed in a Sept '09 letter to the SEC that "the offering materials disclosed all material facts." Yet, the only doc circulating is the marketing flipbook; that is not a legal offering document. It would be helpful to see the evidence.
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