Comments on: Goldman’s Abacus lies A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: tippygolden Wed, 05 May 2010 01:42:56 +0000 Did IKB believe Paulson was long on the deal? It seems to me IKB would be called to testify at the civil trial to clear up this issue.

By: nemoknada Sun, 25 Apr 2010 21:09:36 +0000 I guess you were absent the day they taught that the facts alleged in a legal complaint are, duh, alleged facts. You write as if they are all true.

By: lancec Wed, 21 Apr 2010 23:29:11 +0000 Does the “Never Scared” part of the motto mean the blog is insufficiently afraid of being foolish, but with confidence?

By: essorkm Wed, 21 Apr 2010 16:16:04 +0000 just read Magnetar analysis at

GS = Magnetar ….. nearly same M.O.

RA’s are not the only paid stooges in the CMO mills, so are the “CMO Managers” who presumably independently select the securities.

both Magnetar and GS ‘outsourced’ all fiduciary duties to hand-selected stooge CMO management firms

By: Yuansavvy Wed, 21 Apr 2010 14:58:05 +0000 Oh.. Everyone is assuming that the Securities in this deal were traded at face. The reality is as aged first loss pieces, they were probably traded at 10% of face which means even if GS actually kept the B-Pieces (First Loss of Abacus 2007-AC1) their real loss would have been $0 as the super senior had already been overcharged by 200% of the real cost (discounted from face). The $90M loss based on face value of B-Pieces is a standard lie by MBS players to cover up their frauds. It works every time and servicers and trustees use it all the time in the courts and goes over so well.

By: Yuansavvy Wed, 21 Apr 2010 14:48:45 +0000 Has anyone seen the Pooling agreement or any other deal documents other than this Abacus 2007-AC1 PDF? I would love to see the Pooling agreement. Since the trust is on La Salle trustee website (now BAC), I assume they are the Trustee. But where are critical documents? I like to see the Pooling Agreement and distribution reports. It seems they are locked up now. If you have any of these docs post them. Then I will tell you who has done what. As it stands now. GS – Guilty of Fraud and RICO, Paulson – Guilty of Fraud and RICO, ACA Guilty of Fraud and RICO. La Salle – Most Guilty of all for Signing the deal, forming the bogus trust, registering (I would assume they did not do this) in Cayman, Filing bogus 1066 Tax Returns (1066’s)and issuing false Distribution Reports for a trust whose assets were defaulted bonds (artificially kept alive by advances of servicers).

But unfortunately, SEC has a conflict of interests. It can not make the accusations it should because it would open the door for total annihilation of all financial institutions in U.S. whom are all guilty of participating in these MBS criminal activities and equity stripping. U.S. Government has just spent over 5 Trillion Dollar to prop up all these bankrupt financial institutions and there is no way it can allow SEC to take them down. This case is just a slap on the wrist to stop GS from raiding the cookie jar.

It will be settled in a very quick order to prevent conviction of GS. The Fraud conviction would make Goldman and other MBS players liable for $5+ trillion to foreign financial institutions and governments who were raped by Wall Street.

By: Nindy Wed, 21 Apr 2010 10:02:24 +0000 This is a very interesting case, and nuances do matter. I agree that there seems to be no evidence that Goldman actually stated that Paulson was the equity investor. However, there does seem to be sufficient evidence that ACA believed that Paulson would be the equity investor and that Goldman knew this, yet did nothing to correct ACA’s false assumption. A key point in this case is whether Goldman was obliged to do so.
In order to answer this, it is important to understand some of the key nuances of this industry. For a CDO manager, it is a logical assumption that the “Transaction Sponsor” would take some material long position in the deal. The sponsor was traditionally the key investor, the person taking the riskiest part of the deal (usually the equity). It is also customary to work with the “key investor” to select the portfolio as it is assumed that all parties have aligned interests. The “key Investor” is, in every way, your customer and, like in any industry, you take their recommendations seriously. Goldman introduced Paulson as the “Transaction Sponsor” and encouraged, in fact facilitated, ACA to work with Paulson on the portfolio selection. In this industry, these actions are tantamount to stating Paulson was taking the equity.
But even if the Courts don’t buy that argument, not identifying Paulson as a party who will be shorting the deal is akin to encouraging your clients to play in a card game where you knew the deck had been stacked by a casino in Vegas. If the client knew, there is no way they would play. They would play at one the other 50 casinos in Vegas. No rationale investor, sophisticated or not, would select a deal where they knew the deck was so blatantly stacked against them over other deals where it was not. Goldman’s lack of disclosure is a material omission as I believe it is inconceivable that it would not have affected investor decisions. The SEC should absolutely come down hard on such an unashamed abuse of client trust.
One more point. Goldman state that they invested and lost $90mm from a piece of the deal. They use this fact to support their premise that the deal was not designed to fail. I have dealt with Goldman for many years and there are only two reasons that Goldman would have been long any of the deal. The first is that they weren’t able to sell all of it before the market turned, that is, they got stuck with it. Or, the position was hedged somewhere within the bank. There is no way in a million years that Goldman kept that position simply because they liked the risk; it is just not what they do. I am sure if the SEC dig deep enough they will find the real reason the position was held, but it definitely does not absolve them of guilt.

By: essorkm Tue, 20 Apr 2010 21:54:26 +0000 1. maybe Feds should expand it to a RICO action to include ratings agency as part of the ‘racketeering criminal enterprise’.

2. GS white lie (head fake) in the pitchbook – note slides on “diversification” of everything extraneous except for the fundamentals of the underlying mortgages themselves

By: fdestin Sat, 17 Apr 2010 15:47:02 +0000 I felt compelled to comment as I am surprised you use the allegations made by the SEC as proof rather than using the underlying evidence. I read the complaints in depth and could not find much of a smoking gun.

The crux of the case is based on the following:

“On January 12, 2007, Tourre spoke by telephone with ACA about the proposed transaction. Following that conversation, on January 14, 2007, ACA sent an email to the GS&Co sales representative raising questions about the proposed transaction and referring to Paulson’s equity interest. The email, which had the subject line “Call with Fabrice [Tourre] on Friday,” read in pertinent part: “I certainly hope I didn’t come across too antagonistic on the call with Fabrice [Tourre] last week but the structure looks difficult from a debt investor perspective. I can understand Paulson’s equity perspective but for us to put our name on something, we have to be sure it enhances our reputation.”

And then:

“On January 16, 2007, the GS&Co sales representative forwarded that email to Tourre. As of that date, Tourre knew, or was reckless in not knowing, that ACA had been misled into believing Paulson intended to invest in the equity of ABACUS 2007-AC1.”

It’s really slim at best. Your interpretation of this is: “it told ACA that Paulson had a long position in the deal when in fact he was entirely short.”

I cannot read this myself, merely that ACA seemed to believe that Paulson was going long and that Tourre was aware of that possibility, not that he misrepresented amything pro-actively. Nuances matter.

By: leungsite Sat, 17 Apr 2010 07:24:47 +0000 Removing a golden egg from a chicken (client) and chicken never dies. How lucky is GS, winning either way by shedding undisclosed risks onto customers. Now is the time for retribution.