goldman sachs

GS&Co marketing materials for ABACUS 2007-AC1 – including the term sheet, flip book and offering memorandum for the CDO – all represented that the reference portfolio of RMBS underlying the CDO was selected by ACA Management LLC (“ACA”), a third-party
with experience analyzing credit risk in RMBS. Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc. (“Paulson”), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process. After participating in the selection of the reference portfolio, Paulson effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (“CDS”) with GS&Co to buy protection on specific layers of the ABACUS 2007-AC1 capital structure. Given its financial short interest, Paulson had an economic incentive to choose RMBS that it expected to experience credit events in the near future. GS&Co did not disclose Paulson’s adverse economic interests or its role in the portfolio selection process in the term sheet, flip book, offering memorandum or other marketing materials provided to investors...The deal closed on April 26, 2007. Paulson paid GS&Co approximately $15 million for structuring and marketing ABACUS 2007-AC1. By October 24, 2007, 83% of the RMBS in the ABACUS 2007-AC1 portfolio had been downgraded and 17% were on negative watch. By January 29, 2008, 99% of the portfolio had been downgraded. As a result, investors in the ABACUS 2007-AC1 CDO lost over $1 billion. Paulson’s opposite CDS positions yielded a profit of approximately $1 billion for Paulson.By engaging in the misconduct described herein, GS&Co and Tourre directly or indirectly engaged in transactions, acts, practices and a course of business that violated Section 17(a) of the Securities Act of 1933, 15 U.S.C. §77q(a) ("the Securities Act"), Section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. §78j(b) ("the Exchange Act") and Exchange Act Rule 10b-5, 17 C.F.R. §240.10b-5. The Commission seeks injunctive relief, disgorgement of profits, prejudgment interest, civil penalties and other appropriate and necessary equitable relief from both defendants.

I have warned my readers about following myths and legends versus reality and facts several times in the past, particularly as it applies to Goldman Sachs and what I have coined "Name Brand Investing". Very recent developments from Senator Kaufman of Delaware will be putting the spit-shined patina of Wall Street's most powerful bank to the test, as it appears he ain't playin'. Here's the speech from the esteemed Senator from Delaware (yes, the most corporate friendly state in this country), complete with an analysis that you will NEVER see in the mainstream media!!!

The euro could be in an over-sold situation, says Goldman Sachs and Dr. Feldstein. However, a potential correction can not disguise the elephant in the champagne room - the political and structural weakness in the single currency union.

America's labor unions are finally waking up from their deep slumber and noticing the vast schism in American society between the haves and the have nots. The catalyst: Wall Street's $16.2 billion bonus pay day. As a result Richard Trumka, head of the AFL-CIO, the nation's largest union organization, and a firm supporter of the transaction tax which was proposed in late 2009 and then promptly buried after some serious lobbying by Wall Street, will announce today "two weeks of protests aimed at Goldman Sachs Group Inc., the most profitable securities firm in U.S. history, and the country’s five other largest banks. The AFL-CIO says it plans 200 events covering all 50 states, starting March 15." Summarizing the mood of increasing populist aggression across the nation against Wall Street's uber-wealthy is labor professor at UC Berkley Harley Shaiken: “Wall Street has become a symbol of greed run amok, and what labor is doing here is seeking to demonstrate that it is speaking for working families generally, union member or non- union member.” Strikes in Greece have already paralyzed the country. Will America soon follow?

Many moons ago, July 15, 2009 to be specific, Zero Hedge asked a rather simple question: why does Goldman need a Fed exemption for VaR calculations even though it is a Bank Holding Company. That question, and some others, prompted several members of congress, among which Alan Grayson and Ron Paul, to shortly thereafter pass our query on to Ben Bernanke. Today Ben Bernanke has responded. We present his response. We will share our commentary and views on this response shortly.

In a speech before the UK Treasury Select Committee the Chairman of Goldman Sachs Bank, Gerald Corrigan, who also happens to be a former New York Fed President (and people still wonder where Tim Geithner will end up) noted that it is not Goldman who is at fault in the whole Greek swap fiasco but Eurostat, "which was consulted on the transaction at the time it was entered into and which offered no objection." What is troubling is Corrigan's revelation that "Goldman Sachs was by no means the only bank involved with countries
in these types of transactions...These transactions were not limited to
Goldman Sachs and Greece." Just whose debt numbers will be put under the microscope next?

Before I get started, I want all to realize that this is not Goldman bashing piece. I think it is a [relatively] well run company, but its PR machine appears to be from Kindergarten land, and the aura of invincibility that it enjoys(ed?) is highly undeserved, as a consequence its historical "aura-based" premium is absolutely unjustified. Case in point...

Cramer joins the alternative apocalypse crowed, which in itself is neither surprising nor amusing. However, on the amusing front, we are not sure if we are more entertained by Cramer's comparison of the President with Goldfinger, or the of Goldman Sachs with James Bond. Either way, as the CNBC comedian says: "You CANNOT OWN THESE STOCKS RIGHT NOW" referring to Citi among others. It may very well be time to load up on Citi.

Dear Congressmen, please read this before your questioning of Tim Geithner tomorrow. A complete and thorough investigation by David Fiderer, into what is allegedly the greatest (Goldman-facilitated) taxpayer heist in history for the sole benefit of the self-proclaimed Masters of the Universe.

Also, Dear FRBNY general counsel Thomas Baxter - please tell us how the below is wrong? Because it would appear your proclamations of saving the world are not only self-serving, but flawed and hypocritical beyond measure:

"The party line, expressed in Too Big To Fail and elsewhere, is that an AIG bankruptcy posed a greater systemic risk than a Lehman bankruptcy, because AIG was so much bigger. But that analysis is highly superficial and very misleading. AIG itself was a holding company, which guaranteed the debt of its unregulated financial subsidiary, AIGFP. The lion's share of AIG's revenues and profits, and about 80% of its consolidated assets, were concentrated among its different insurance company subsidiaries. Those insurance companies were solvent. They did not pose any systemic risk. In fact, it's quite likely that they would have continued to operate outside of bankruptcy.

The only subsidiary with major problems was AIGFP, whose financial obligations were guaranteed by the parent. But AIGFP was only about one-third the size of Lehman. It's almost impossible to see how AIGFP ever posed a systemic risk, unless everyone's intention to provide a backdoor bailout to the banks. Put another way, it seems that the only reason that the government needed to step in for AIG was to provide a backdoor bailout to its banks."

• Must read: Bring back Glass-Steagall - Banks that behave like hedge funds (and "trade ahead" of their clients) don't deserve guarantees (WSJ)
• And speaking of Goldman hypocricy - The subsidy that won't die (Slate)
• Friedman: Is China the next Enron? (WSJ)
• Bernanke challenged on rates role in bust (WSJ)
• German economy shrinks 5% in 2009, more than expected (Bloomberg)
• Moody's says Greece, Portugal may face "slow death" (Bloomberg)

A story of how the "vampire squid" caved and offered to help North America's most powerful union...

"Now that the crisis is over, and given the special circumstances of the crisis, and Goldman’s contribution to value-destroying securitizations, it is in the public interest to claw back the money paid to Goldman Sachs. AIG did not need to settle for 100 cents on the dollar in November 2008, and in September 2008, a good negotiator would have refused to hand over more collateral, and should have clawed some back (or insisted it was a temporary loan). Money should be clawed back before Goldman pays out taxpayer subsidized bonuses." - Janet Tavakoli

A week ago we posed several questions to Goldman managing directors Lucas van Praag and David Viniar. Earlier today we received a broad response. We present it in its entirety for our readers. We will provide our counter-response shortly.

Just a quick perusal of news (and an analytical fact or two) in the CRE space that makes one wonder why Goldman Sachs thinks that anyone would believe them. Then again, looking at the ($19 billion) bonus pool, much of which was just nearly halved by the UK government, it appears as if enough people believe them. Let's see what we can to do alleviate that...

I don't want anyone to think this is a Goldman bashing exercise. I actually admire their prowess. Not for operational excellence (as many mistakenly consider them to have when not adjusting accounting returns for risk), but for the way they seem to get away with murder, time after time. You gotta give it to them. I want readers to take time to go through the anecdotal evidence here and decide if it is more profitable to invest with Goldman, or actually attempt to put your bid in to get a slice of that $19 billion, middle class taxpayer funded, regulator protected bonus pool.