Archive
Reuters blog archive
from Financial Regulatory Forum:
Goldman Sachs: Shareholder Revolt Spreads Where the SEC Has Yet to Tread
Where the SEC goes, plaintiffs' lawyers are sure to follow. But in the case of Goldman Sachs, they’ve charged ahead straight into the C-suite, alleging far broader levels of misdeed than the SEC’s limited charges surrounding an individual transaction, writes Erik Krusch of Thomson Reuters Westlaw Business Currents. (Click here for further details.)
Goldman Sachs was charged by the Commission in the case of SEC v. Goldman Sachs and Fabrice Tourre with fraudulently structuring and selling a synthetic collateral debt obligation (CDO). Now plaintiffs’ lawyers are angling for a piece of the Goldman pie, but unlike the SEC, these shareholder suits sport an entirely different caliber of co-defendants.
The SEC’s pursuit of Goldman has topped the headlines for the past week. Goldman has been dogged by disclosure issues on at least two fronts: the ABACUS 2007-AC1 transaction and a Wells Notice regarding ABACUS that the bank later received. The SEC’s case against Goldman turns on the way that the bank disclosed the involvement of hedge fund in the ABACUS 2007-AC1 structuring to other deal parties. The SEC alleges that the deal’s market materials crossed the line for fraud. Considering how popular shorting subprime mortgages and synthetic CDOs became, it remains to be seen if Goldman is the only bank that the SEC is eyeing for fraudulent CDO disclosure. For additional information on the case of SEC v. Goldman, Sachs & Co. and Fabrice Tourre and Paulson & Co.’s role, please see the previous Westlaw Business Currents article CDO Litigation: The SEC, Goldman, and its Courtroom Cousins.
Similarly, questions revolve around Goldman’s decision not to disclose the Wells Notice it received regarding ABACUS 2007 AC-1. A Wells Notice informs a company or individual that the SEC is considering civil charges. Public companies often disclose when they or one of their employees receives a Wells Notice, but Goldman didn’t disclose the notice it received on Abacus. For additional information Goldman’s Wells Notice and other banks disclosure of subprime related Wells Notice please see the previous Westlaw Business Currents article Hot Topic: Disclosing Wells Notices and Goldman.
As of this week, the SEC isn’t alone at taking aim at Goldman’s disclosure. The recently filed Richman v. Goldman Sachs Group Inc et al. is a shareholder class action suit led by named plaintiff class representative Ilene Richman, filed in the Southern District of New York. The complaint takes aim squarely at the bank’s decision to not disclose the ABACUS Wells Notice. The suit alleges that Goldman and co-defendants Lloyd C. Blankfein (Chairman and CEO), David A. Viniar (CFO), and Gary D. Cohn (President and COO) violated federal securities law by issuing materially false and misleading statements during the class period – between October 15, 2009 and the time it was publicly revealed on April 16, 2010 that the SEC had sued Goldman. The complaint asserts, among other things, that updates the bank made to its 10-Q and 10-K legal proceeding sections were false and materially misleading because they made no mention of the Wells Notice and ongoing investigation into ABACUS 2007-AC1. Robbins Geller Rudman & Dowd is representing the plaintiffs in the matter.
Ilene Richman is not the only irate shareholder. Rosinek v. Blankfein et al. is a shareholder derivative suit filed in New York State Supreme Court. The suit alleges breach of fiduciary duty against Goldman Sachs and names each member of the board of directors, including CEO and Chairman Lloyd Blankfein, as co-defendants. The complaint in this case alleges that the board breached its fiduciary duty by failing to institute adequate internal controls on the 23 ABACUS transactions, one of which is the focus of the SEC complaint. The suit claims:
As a direct and legal result of the Individual Defendants' wrongful conduct, Goldman Sachs has been significantly and materially damaged, faces billions of dollars of liability, has incurred and will continue to incur millions of dollars of expense in defending the claims against the SEC and investors, and has suffered serious damage to its reputation and image.
The suit is seeking maintenance as a derivative action, compensatory damages, court costs, and any further compensation the court deems appropriate. Farqui & Farqui is representing the plaintiffs.
Spiegel v. Blankfein et al. is yet another shareholder derivative suit that has been filed in New York State Supreme Court. The complaint is a carbon copy of the complaint in Rosinek v. Blankfein et al. Farqui & Farqui and Gardy & Notis are representing the plaintiffs.
It remains to be seen if the SEC or shareholders will have any luck cowing a defiant Goldman Sachs in court. The shareholder actions, however, are aiming much higher in the corporate food chain than the SEC’s target, Vice President Fabrice Tourre. It seems shareholders think that disclosure problems swirling around ABACUS 2007-AC1 and the Wells Notice reside in the boardroom and at C-suite level.
from Global Investing:
Investors wary of BP oil spill cost estimates
BP’s CEO Tony Hayward reckons the $100 million cost of drilling a well to divert the flow from a leaking oil well in the Gulf of Mexico is the biggest hit the oil major will take in the Deepwater Horizon tragedy.
The Deepwater Horizon rig exploded last week, and sank, with the loss of 11 workers, who are now presumed dead, while the well it was drilling is leaking 1,000 barrels of crude a day into the sea.
from Financial Regulatory Forum:
Will Goldman Complaint Repair the Damage from Madoff Fiasco?
Some former government prosecutors are cheering the SEC's case against Goldman Sachs. Some even called it a watershed event that might rehabilitate the SEC's image, which has been tarnished in the fallout from the financial crisis and the failure to catch financial fraudsters like Bernard Madoff. Now all the SEC has to do is win its trial against Goldman, which is vowing to fight the charges, reports WG&L, from Thomson Reuters tax and accounting specialists.Some lawyers called the SEC’s civil complaint against Goldman Sachs Group Inc.'s brokerage unit a “watershed” moment, in which the agency will be once again looked at as a tough regulator.
“I looked up and said, ‘thank, God,’” said Stanley Sporkin, who ran the enforcement division in the 1970s and is a former federal judge. The complaint gives “tremendous credibility to the agency.”
from Financial Regulatory Forum:
Democrats press advantage on financial reform
By Andy Sullivan and Kevin Drawbaugh
WASHINGTON, April 21 (Reuters) - Democrats in the U.S. Senate pressed forward on a sweeping regulation overhaul on Wednesday, backing a measure to drive banks from the lucrative derivatives market at the heart of the financial crisis.
As President Barack Obama prepared to call on Wall Street to get behind reforms, Democrats sought to ride widespread public anger at the financial industry to a legislative victory in Congress. Bank stocks were mixed in broadly flat trading.
Democratic Senator Christopher Dodd, who is heading up the overhaul effort, said he would present legislation to the Senate within hours, but aides cautioned that a pivotal procedural vote could not come until early next week.
The overhaul will likely include a crackdown on the unregulated $450 trillion derivatives market, which could drive Wall Street behemoths like Goldman Sachs <GS.N> and Morgan Stanley <MS.N> to restructure or spin off derivatives trading.
"If banks want to be banks, they can remain banks, but they're going to need to spin off that activity," Senate Agriculture Committee Chairman Blanche Lincoln said after her panel voted to advance the measure on derivatives.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ COLUMN: GOP in dilemma on financial reform [ID:nLDE63J0XH] FACTBOX: Major financial reform proposals [ID:nLDE63D217] NEWSMAKER-Farmer's daughter takes on Wall St [ID:nN16132985] TAKE A LOOK: U.S. Financial Regulation [ID:nN16148428] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Lincoln's hard-hitting bill, in whole or in part, was expected to be folded into a broader measure already approved by the Senate Banking Committee. Debate on it could begin next week. The Senate is not slated to cast any votes on Friday.
Democrats see Wall Street reform as a chance to harness voter anger at big banks for their role in the 2007-2009 economic crisis ahead of November's congressional elections.
Fraud charges brought last week against Goldman Sachs have given the overhaul more momentum. "It just reinforces the perception that people have about some of these Wall Street investment banks," Senator John Thune told reporters.
After meeting with other Republicans on the status of negotiations with Democrats over reform proposals, Thune said it was still possible to hammer out a bipartisan measure.
"I think we're going to end up with a bipartisan bill," said Republican Senator Bob Corker on the Senate floor.
Senate Banking Committee Chairman Christopher Dodd is negotiating with Republican Richard Shelby, who told reporters after the briefing that the two sides were still talking.
Democrats need at least one Republican vote to advance the broader reform measure in a procedural vote. Key Republican moderates like Susan Collins have said they will withhold their support until Dodd and Shelby have reached a deal.
Asked if he was confident all 41 Republicans could hold together and block the Democratic bill, if it came to that, Thune said, "I'm not entirely confident, but I'm hopeful."
OBAMA URGES TIGHT RULES
The Democrats' reform bill would cut the U.S. budget deficit by $21 billion over the next 10 years, according to Congressional Budget Office estimate obtained by Reuters.
The estimated reduction in the budget deficit over the 2011-2020 period stems largely from charging the financial industry assessments for a fund to liquidate large, troubled financial firms, the office said.
Obama called for tighter rules against Wall Street excess.
"We have gotten into one of those places where we need to update those rules of the road," Obama said in an interview with CNBC on the eve of a financial speech in New York.
In his speech on Thursday, Obama will tell Wall Street to "join him in the effort to reform the financial system -- not fight it" and urge lawmakers to pass the legislation under consideration now by the Senate, a White House official said .
Republican Charles Grassley voted with Democrats to advance the derivatives bill, although he said he might still vote against the wider bill on the Senate floor. [nN21197740]
Any proposal that clears the Senate would have to be reconciled with an overhaul passed by the House of Representatives last December.
Lincoln shocked markets last week by proposing banks participating in the swaps market should give up protections like access to the Federal Reserve discount window -- which could force them to sell off swaps trading desks.
Derivatives, which are based on underlying assets like bonds or commodities, have been blamed for exacerbating the credit crisis and contributing to the sort of run on assets that downed Lehman Brothers.
Swaps transactions also helped trigger insurer American International Group's <AIG.N> massive government bailout.
The bill would require most derivatives to trade on exchanges and pass through clearing houses.
The head of the Securities and Exchange Commission criticized the bill for removing certain securities options, exchange-traded funds and securities forwards from the agency's oversight. [nN21197408]
Lincoln's bill is the latest salvo in a barrage of tough measures meant to crack down on Wall Street for the excessive risk-taking that precipitated the recession.
A congressional panel investigating the origins of the crisis said it has issued a subpoena to Moody's Corp <MCO.N>, a major credit rating agency, because it has not complied with voluntary requests for information. [nWBT013821] (Additional reporting by Christopher Doering, Roberta Rampton and David Lawder; editing by Carol Bishopric) ((andy.sullivan@thomsonreuters.com; +1 202 898 8391; Reuters Messaging: andy.sullivan.reuters.com@reuters.net)) Keywords: FINANCIAL REGULATION/
Thursday, 22 April 2010 00:35:22RTRS [nN21479339] {C}ENDS
from Financial Regulatory Forum:
Goldman CEO attacks SEC fraud charges – FT
NEW YORK, April 21 (Reuters) - Goldman Sachs Group Inc <GS.N> Chief Executive Lloyd Blankfein attacked U.S. Securities and Exchange Commission fraud charges against the bank in phone calls to clients, the Financial Times said on Wednesday.
In its civil fraud lawsuit on Friday, the SEC alleged that Goldman failed to tell clients that complex mortgage-related securities they were buying had been created by billionaire hedge fund investor John Paulson, who stood to benefit if the securities lost value. Paulson has not been charged.
Blankfein is trying to bolster confidence of business partners following the lawsuit, according to the newspaper.
It said that in conversations with private equity executives and others, Blankfein left clients with an impression he is eager to fight the case in court.
"He was very aggressive," the newspaper said, quoting an unnamed person called by Blankfein on Wednesday. "He feels that the government is out to kill them, that they are under attack and the whole thing is totally political," and that the SEC lawsuit "hurts America," the person said.
A call to Goldman was not immediately returned.
According to the newspaper, citing a person who was called, Blankfein also said a female staffer at ACA, the manager of the security, knew that Paulson & Co intended to bet against the transaction.
This, it said, would go against SEC charges that Goldman failed to disclose that Paulson was taking the opposite side. (Reporting by Jonathan Stempel; Editing by Lincoln Feast) ((jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net))
Keywords: GOLDMAN/ATTACK
Thursday, 22 April 2010 03:53:19RTRS [nN21119356] {C}ENDS
from Financial Regulatory Forum:
Paulson reassures clients on Goldman deal, no exits yet
By Svea Herbst-Bayliss
BOSTON, April 20 (Reuters) - Clients with Paulson & Co, which was involved in a mortgage deal that prompted civil fraud charges against Goldman Sachs <GS.N>, spoke with the manager on Monday, but so far no one has notified the firm of plans to leave his fund, several investors said.
"We are interested in buying out people who want to get out of Paulson but so far no one has stepped forward," one of the investors, who asked not to be named because of the sensitivity of the matter, said on Tuesday evening.
"I just spoke with someone from Paulson's investor relations team this evening and there isn't anyone who has said that they want to get out," he added.
After holding a conference call on Monday, the $32 billion hedge fund sent a sent a letter to clients late on Tuesday. A Paulson & Co spokesman declined to comment on the matter.
Paulson & Co, which earned $15 billion by correctly betting in 2007 that the housing market would collapse, has come under a cloud since U.S. securities regulators on Friday accused Goldman Sachs of misleading investors by failing to say that the hedge fund was betting against a Goldman mortgage deal it had also been instrumental in helping the bank set up.
John Paulson, who personally earned nearly $4 billion from his housing bets, told investors that neither he nor anyone else at the firm had received a so-called Wells notice indicating that charges might be filed, the people who listened said.
New York-based Paulson & Co has not been charged with any wrongdoing but investor nervousness grew over the weekend, prompting the 16-year old firm's founder to host a conference call on Monday where dozens of people participated.
Concerns mounted that the government's probe might widen to possibly include other players or that the Paulson & Co might be consumed by battling the whiff of wrong-doing.
The hedge fund firm has been one of the most profitable in the $1.5 trillion hedge fund industry in recent years.
The Wall Street Journal reported that some of Paulson's clients are indicating they may withdraw money. [ID:nN20145922]
Anyone wanting to exit Paulson's funds must stick to the normal time schedule and notify the firm by next April 30, 60 days before the end of the second quarter.
One investor who listened to the call said he reversed his plans to exit after hearing John Paulson calmly lay out his bet on the conference call. (Editing by Lincoln Feast) ((Svea.Herbst@Reuters.com; +1 617 856 4331; Reuters Messaging: svea.herbst.reuters.com@reuters.net))
Keywords: GOLDMAN/PAULSON REDEMPTIONS
Keywords: GOLDMAN/PAULSON REDEMPTIONS=2
Wednesday, 21 April 2010 03:26:23RTRS [nN20148074] {C}ENDS
from Financial Regulatory Forum:
Goldman Sachs profit tops forecast, UK opens probe
By Steve Eder and Steve Slater
NEW YORK/LONDON, April 20 (Reuters) - Goldman Sachs Group Inc <GS.N> said first-quarter earnings nearly doubled, and Britain's financial regulator launched a formal probe related to civil fraud allegations against the Wall Street bank.
Goldman's results came four days after the firm was accused of fraud by the U.S. Securities and Exchange Commission in the structuring and marketing of a debt product tied to subprime mortgages.
"On the face of it, Goldman's numbers are pretty good, which they do time and time again," said David Morrison, market strategist for GFT Global Markets in London. "Investors will want to focus on the blow-out numbers, but the news the FSA is also probing the firm takes some of the shine off."
Goldman said net income rose to $3.29 billion, or $5.59 per share, from $1.66 billion, or $3.39 per share, a year earlier. [ID:nN20251055]
Analysts on average had forecast $4.01 per share, according to Thomson Reuters I/B/E/S.
Goldman Sachs shares rose 1.3 percent in premarket trading.
Goldman emerged as Wall Street's most influential bank after the financial crisis but has faced a backlash over its pay and business practices.
The bank's co-general counsel, Greg Palm, launched a rebuttal of the SEC charges during the bank's earnings conference call.
Palm said the firm was "very disappointed" that the SEC had brought charges and insisted that Goldman "would never mislead anyone."
He also said investors who lost money on the subprime mortgage product that is the focus of the SEC suit had a wealth of experience and background in such deals.
'RECKLESSNESS AND GREED'
Goldman's forecast-beating earnings came as Britain's Financial Services Authority (FSA) said it had started a formal investigation into Goldman Sachs International in relation to the SEC allegations. FSA said it would work closely with its U.S. counterpart. [ID:nLDE63J0TP]
UK Business Secretary Peter Mandelson said on BBC Radio, "We have got to look at the whole system of constituting and regulating banks. We need a system of regulation, a system of levying banks, which is internationally applied."
Nick Clegg, leader of the Liberal Democrats, the UK's third-largest party, said the allegations against Goldman "are a reminder, if we needed one, of the recklessness and greed that disfigured the banking industry as a whole."
In the United States, political tensions were heightened by reports that the five SEC commissioners split along political lines last week in a vote on whether to file suit against Goldman. The three Democrats voted in favor of the legal action, while the two Republicans opposed it, according to press reports.
"I have my doubts about this attack on Goldman Sachs, for the simple reason that with two members of the SEC clearly against the indictment, it doesn't make (SEC Chairman) Mary Schapiro's job any easier," said David Buik, senior partner with BGC Partners in London. (Writing by Christian Plumb; Additional reporting by Douwe Miedema and Jon Hopkins in London; editing by John Wallace) ((Reuters Messaging: christian.plumb.reuters.com@reuters.net +1 646 223 6134)) ((Multimedia versions of Reuters Top News are now available for: * 3000 Xtra: visit http://topnews.session.rservices.com * BridgeStation: view story .134 For more information on Top News: http://topnews.reuters.com)) Keywords: GOLDMANSACHS/
For Related News, Double Click on one of these codes:[C] [D] [E] [M] [O] [T] [U] [MTL] [GRO] [SOF] [OIL] [MNI] [NAT] [ELN] [NAW] [G] [UKI] [EMK] [RINVM] [CAN] [NEWS] [US] [USC] [DBT] [BSVC] [DFIN] [FINS] [BANK] [BNK] [FIN] [FUND] [HEDGE] [RES] [INVB] [CDM] [CORPD] [BISV] [INVM] [INVS] [BACT] [LEN] [RTRS] [GS.N]
For Relevant Price Information, Double Click on one of these codes:<GS.N>
Tuesday, 20 April 2010 13:49:12RTRS [nN20251740] {EN}ENDS
from Financial Regulatory Forum:
UK launches formal probe into Goldman Sachs
LONDON, April 20 (Reuters) - Britain's financial regulator started a formal enforcement investigation into Goldman Sachs <GS.N> on Tuesday, four days after U.S. regulators filed a fraud case against Wall Street's biggest investment bank.
"Following preliminary investigations the Financial Services Authority (FSA) has decided to commence a formal enforcement investigation into Goldman Sachs International in relation to recent SEC allegations. The FSA will be liaising closely with the SEC in this review," the UK regulator said in a short statement.
The U.S. Securities and Exchange Commission has accused Goldman of hiding from investors the fact that a prominent hedge fund manager was betting against a subprime mortgage product that he helped create. [ID:nN19193616]
(Reporting by Steve Slater; editing by Douwe Miedema) ((steve.slater@reuters.com; +44 207 542 4367; Reuters Messaging: steve.slater.reuters.com@reuters.net))
Keywords: GOLDMAN/
For Related News, Double Click on one of these codes:[E] [U] [NAW] [C] [D] [M] [O] [T] [OIL] [NAT] [UKI] [PSC] [RNP] [DNP] [PCO] [PCU] [EMK] [INVB] [FIN] [BNK] [FUND] [GB] [DE] [US] [REGS] [CRIM] [NEWS] [BISV] [FINS] [INVS] [EUROPE] [WEU] [CEEU] [EZC] [BACT] [CLJ] [GEN] [PIL] [LEN] [RTRS] [GS.N]
For Relevant Price Information, Double Click on one of these codes:<GS.N>
Tuesday, 20 April 2010 10:14:14RTRS [nLDE63J0TP] {EN}ENDS
from Financial Regulatory Forum:
BREAKINGVIEWS-How Goldman Sachs fell out with the SEC
By Nicholas Dunbar -- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --
LONDON, April 20 (Reuters Breakingviews) - In December 2000 I received an email from the Goldman Sachs <GS.N> press office in New York, nominating the firm for Risk magazine's "Risk Manager of the Year" award. Central to the pitch was how the Wall Street bank had run a boot camp for its supervisors at the U.S. Securities and Exchange Commission, training them in concepts like value-at-risk and derivatives hedging.
It was a win-win move, both sides told me. Goldman ensured its regulator was up to date with financial innovation and earned brownie points for its efforts. By offering a "light-touch" regime for its charges, the SEC hoped to prevent the securities firms under its purview from basing their fast-growing over-the-counter derivatives operations in London.
I was technical editor of Risk at the time and I remember feeling a sense of wonder at the regulator's willingness to take lessons from one of the firms it policed. But I also accepted that Goldman was motivated by good citizenship. If derivatives were coming to Wall Street, why shouldn't Wall Street's best firm join forces with its watchdog to ensure that everything was done properly? The Risk Manager of the Year Award for 2001 went to...Goldman Sachs.
But the SEC did not realise how innovations like the credit default swap would later transform the markets it regulated. Its mission of ensuring market fairness was to collide head-on with new business imperatives driven by the "derivativisation" of the credit market.
Like many, the SEC was anchored in an age-old understanding of markets where securities are originated, bought and sold. Derivatives linked to securities fundamentally changed this cosy universe by creating a synthetic market, a world of securities that imitate and subvert reality.
The business of chopping and bundling U.S. mortgages into bonds, and then into collateralised debt obligations (CDOs), was already a weakly regulated market riddled with conflicts. But it was nevertheless a cash market. The fact that every such bond uniquely connected investors to mortgage borrowers constrained the market's growth, in turn curbing the potential for damage.
During 2004 and 2005, the industry found a way of expanding the market to cater to growing investor demand -- "synthetic" securitisation. It was a critical evolution. Whereas a standard CDO was a package of real mortgage securities that were themselves composed of real mortgages, a synthetic CDO was really just a bet between counterparties.
When synthetic CDOs were first invented, the short position -- effectively a form of credit insurance -- was typically taken by commercial banks seeking to hedge corporate loan portfolios. Regulators applauded this innovation as making banks safer.
But this was not the case with synthetic subprime CDOs. The short position was not typically taken by investors with an existing long position in subprime mortgages who were seeking to hedge against losses they in fact hoped to avoid. It was taken by speculative investors actively betting on losses materialising.
Goldman, like other banks, operated in all segments of the market -- packaging home loans into mortgage-backed securities and putting these into CDOs, as well as trading synthetic CDOs.
It's not clear that investors on the long side of these synthetic trades really understood what was different about a synthetic subprime CDO. In a cash CDO, investor confidence comes from the knowledge that almost everyone else has skin in the game: the bank arranging the deal, and especially the CDO equity investor who takes the most risk. With a synthetic CDO, it's a hall of mirrors. Not only are the underlying assets matched with short positions, but each slice of the CDO can also be shorted.
The key issue with Goldman is timing. After first experiencing losses in subprime in December 2006, the bank started hedging its exposure, and by March 2007 (part of the bank's second quarter), the bank began shutting down its mortgage and cash CDO origination business, at the cost of several billion dollars.
However, Goldman could still make money in subprime by matching investment clients via synthetic CDOs, with the difference being that the driving force was clients seeking to profit from impending meltdown. This is the moment that Fabrice Tourre, a Goldman vice-president, created the now infamous Abacus deal with hedge fund whizz John Paulson. And the timing may help explain why the SEC's fury is so apparent in the complaint filed last week against Tourre and Goldman.
Goldman's defence against the SEC suggests that investors like IKB were fully aware of its subtle transformation from cash CDO underwriter to derivative intermediary, and were asking Goldman for new investment opportunities. By trading default swaps to build Abacus, Goldman ended up losing money. But the SEC seems to be arguing that in a world that had moved away from traditional underwriting, arrangers needed to be much sharper about the explanations they gave investors about synthetic CDOs.
The SEC may have other reasons for feeling that Goldman had forgotten what the regulator expected of a firm at the top of the Wall Street hierarchy. When Goldman taught SEC staff about derivatives and risk management almost a decade ago, there was an implicit pledge that it would keep the SEC educated about market developments. But it was not until Bear Stearns bailed out two hedge funds in July 2007 that the regulator really learned about the transformation of the subprime CDO market and the explosion of synthetic structures, according to people familiar with the watchdog.
Goldman may protest that it had no obligation to share tentative risk management insights with its regulator. But the bank shouldn't be surprised that the SEC is now rubbing the firm's nose in the mess its bankers thought they were so clever in avoiding.
Nicholas Dunbar's book, 'The Devil's Derivatives' will be published later this year.
-- Reuters Take a Look: [ID:nN16131161]
-- Graphics:
CDS underwriters 20067/07 http://r.reuters.com/tyg48j http://r.reuters.com/vak48j The case against Goldman Sachs http://graphics.thomsonreuters.com/10/04/US_GSAB0410.gif
(Editing by Chris Hughes and David Evans)
Keywords: BREAKINGVIEWS GOLDMAN/SEC
Tuesday, 20 April 2010 09:59:49RTRS [nLDE63I1LX] {EN}ENDS
