Even caveat emptor has limits, though, and they kick in at the word fraud. I still think SEC has something of an uphill battle, but if even one of the pieces of evidence presented in the complaint can constructively be interpreted as a lie, then the line is crossed.

- I could be wrong here, but there is a very good chance Paulson was actually long the equity tranche of ABACUS while still expecting the collateral to fail miserably. Because it takes a while for the bonds to start taking writedowns, they initially generate excess interest that is paid out to the equity holder. If they held the equity, they get paid a few million dollars on the long side before the bonds start to fail, and then they get their billion on the short side when the thing blows up. This serves as further cover that they were actually “long” the deal.

- This may further tarnish Goldman’s reputation on Main Street, but this whole thing comes as no surprise to anyone in the financial sector. Their reputation is not that they have their clients’ best interests in mind. Their reputation is that they are incredibly smart and good at making money and they will rip your face off without hesitation.

That seems more than a little overgenerous to IKB and ACA. IKB clearly needed adult supervision – they should have known (a) somebody was taking the other side of the bet for a reason and (b) GS and ACA were making money from putting the deal together. They acted like a befuddled 90 year old signing away his SS check. What were all the high salaried managers and analysts at IKB doing for their depositors? Flying to NYC and going out to dinner with GS?

And ACA put their name on the line. They represented to the customer that they had put together the package in good faith where they had really just taken a fee and passed on Paulson’s design. They had an ethical and seems to me legal obligation to walk away from the deal, but they too the fee and played along.

> The CEO should apologise to his clients, his people and the public about the deals GS has been involved in under his leadership
> Next, he should step down and reshuffle the executive committee and the broad of directors
> There should be investigation and internal changes to the way Goldman runs. Go back to serving clients and long term profit.

Good luck.

If it’s at all unclear whether the FBI has saddled its pony yet, it shouldn’t be much longer.