Comments on: Goldman’s misleading statement on ACA

By: TinyOne

TinyOne — Mon, 19 Apr 2010 22:20:11 +0000

In regards to Sandrew’s point, are you going to correct this post Felix – - “It (ACA) certainly never bought any of the Abacus securities”?

Why would you use the term certainly in the first place? Any documentation you can link to or was the merely an unsubstantiated assertion on your part?

By: Sandrew

Sandrew — Mon, 19 Apr 2010 20:19:31 +0000

Here’s the reconciliation of the $951 vs. %909.

Per the Goldman defense document (part I), ACA was both a direct investor in the Notes issued by Abacus 2007-AC1 (to the tune of $42M) and a super-senior protection writer (“investor/insurer” take your pick) for the reference portfolio (total notional amount subject to protection $909M). To quote the defense document, page 7 (14 of pdf):

“ACA acted as the Portfolio Selection Agent for the
2007-AC1 transaction, invested $42 million in the 2007-AC1 notes, and sold protection to Goldman Sachs on the $909 million notional amount super senior tranche of the transaction.”

By: IanFraser

IanFraser — Mon, 19 Apr 2010 17:24:42 +0000

BTW it seems likely that GS’s strategy will be to scapegoat the “Fabulous” Fabrice Tourre, the 31-year-old Frenchman who is thought to have sought to defraud the bank’s customers by not telling them that noted short-seller John Paulson chose the 90 pools of mortgage assets in Abacus. Once Fab realises that he’s to be made the sacrificial lamb won’t he go to the SEC and sing til his lungs hurt?

http://www.businessinsider.com/henry-blo dget-goldman-lays-groundwork-to-scapegoa t-fabrice-tourre-but-keeps-options-open- 2010-4#ixzz0lZEZcajh

By: rootless

rootless — Mon, 19 Apr 2010 17:22:44 +0000

I wonder if Goldman remembered to tell Warren Buffet about the Wells notice.

In any event, Felix seems determined to consider ABN/AMRO, ACA, and IKB and the hundreds of millions of dollars a year employees of those organizations poor unfortunate sheep that were gulled by big bad GS. Poor widdle bankers. They really did want to invest in wind power and flowers for children, while living on minimum wage, but GS convinced them to pay themselves millions and take the OPM to the casino.

By: IanFraser

IanFraser — Mon, 19 Apr 2010 17:08:18 +0000

Basically, Felix, I’m not sure if we can believe a word we hear from Goldman any more. Which is a shame. It is so tangled in a web of deceit, it doesn’t really know which way to turn!

By: GingerYellow

GingerYellow — Mon, 19 Apr 2010 17:01:48 +0000

“Goldman, then, seems to be conflating the concepts of insurance and investment”

Maybe so, but they’re hardly alone. The entire industry referred to and still refers to sellers of CDS on super senior exposures as investors – they’re called synthetic investors to distinguish them from cash investors.

Also, I’m not sure what your line of thinking is with this: “Probably because it sniffed out the cost of buying $1 billion of credit protection on ACA, and it was a lot more than the 17 basis points that it managed to get from ABN Amro by getting ABN to intermediate the wrap.”

That’s 17bp to ABN on top of the 50bp to ACA, not the total cost to Goldman. Of course it was less than the ACA swap – for ABN there was “double default protection” – both the CDO and ACA had to fail for them to pay out. As to their motivation, GS claim in their formal defence to the SEC’s complaint (you can decide whether to believe it or not) that the reason they got ABN to intermediate was that ACA would not post collateral and ABN would (and did).

By: mister_x

mister_x — Mon, 19 Apr 2010 16:47:57 +0000

I sure hope the SEC lawyers are good and don’t get done in by the bluster from GS. I had you pegged as a GS apologist but boy, was I wrong. Kudos on all your recent posts.