Comments on: Goldman’s biggest lie http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: sidsahu http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-48661 Tue, 26 Nov 2013 05:46:28 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-48661 I just read through the entire article of yours and it was quite good. This is a great article thanks for sharing this informative information. I will visit your blog regularly for some latest post.
abacus
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By: hsvkitty http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-14135 Wed, 28 Apr 2010 04:59:24 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-14135 Good analogy Selenesmom. It was difficult to understand the steaming pile of excrement that was the Abacus deal, but over the past week, I have come to understand it very well, indeed.

My head is shaking now rather then reeling at the high risk/high yield bets on non-entities, being made other people’s money by those entrusted with their life savings and retirement funds.

Words like Investment, banker, broker, client, synthetic, credit, debt, trust, security, ethics and other such words all have a different meaning then I realized, in the ‘sophisticated’ world of finance.

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By: SelenesMom http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-14059 Mon, 26 Apr 2010 18:45:21 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-14059 OnTheTimes, try reading the pitchbook again. There’s a whole section about ACA, its qualifications, and its personnel and their backgrounds and qualifications. Nothing there about any role for Paulson, or even anything to the effect of “The manager may be assisted from time to time by outside specialists.”

So this suggests strongly that asking someone to invest into Abacus (yes, I know there would be more involved than just one pitchbook) was like asking someone to bet on a special exhibition game between the Chicago Cubs and the Boston Red Sox, but without mentioning that the Cubs were not playing their usual roster, but instead one hand-picked by the manager of the St. Louis Cardinals from a pool of all major and minor league baseball players in the U.S.

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By: OnTheTimes http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-14041 Sun, 25 Apr 2010 19:16:48 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-14041 viscout, many “investment banks” (if any derision is detected, it is intentional) broker deals without both parties knowing who the other side is. That’s why the buyers and sellers often use a third party, because they WANT to be anonymous. Otherwise, they might as well use ebay. Did IKB ask Goldman who was on the other side of the deal? (if they didn’t, then is it still Goldman’s fault?) And if Goldman refused to tell them who was on the other side, why did they still go ahead with it? If the identity was important to them in their decision to gamble their client’s money, why did they do it without knowing who the seller was?

Also, the creator of the bonds is irrelevant, unless you are somebody who is willing to bet billions of dollars of other people’s money solely on reputations that have no basis in reality. Then I can see why you would want to know who put the bonds together. What you seem to be saying is that IKB has absolutely no responsibility to perform any due diligence, and that their clients should be content paying them their fees just for buying things based on face value (“Goldman sold it to us, and that means it’s a good investment”. Or were they expecting an automatic profit on their investment? Did they not know there was somebody who would lose money if they made money? Or did they think it was all magic, that profits are created out of thin air, with no risk to anyone?

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By: vlscout http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-14040 Sun, 25 Apr 2010 18:06:49 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-14040 OnTheTimes: ” It was a sports game, and the rosters of both teams were available for both gamblers to see.”

Well, one player was not content with just seeing the teams. He made sure to influence its composition, otherwise he would not have played at all.

Goldman did not disclose this to the other player.

IKB would not have bet if knowing that their team was hand-picked by their opponent in the game, regardless how lazy, greedy for yield and incompetent they are.

You do not need much due diligence to realize that it is wise not to bet in such case.

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By: OnTheTimes http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-14038 Sun, 25 Apr 2010 17:00:30 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-14038 viscout, it wasn’t a dice game. It was a sports game, and the rosters of both teams were available for both gamblers to see. The losers of the bet never bothered to look at the rosters, they just took the word of some sportswriter (Moodys or S+P) who favored one team heavily.

If Goldman actually cared about their clients as they are falsely rumoured to (like a bookie might do with one of his repeat customers), they would have told the losers that they really didn’t think it was a great idea (assuming that people at Goldman were all in agreement that the bonds were a bad idea, which they weren’t, as they placed bets on both sides). But Goldman doesn’t really care about its clients, as long as they think they can be replaced, which they obviously are able to do, over and over, because their customers, managers of other people’s fortunes and pensions, are completely inept.

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By: vlscout http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-14026 Sun, 25 Apr 2010 06:56:56 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-14026 by OnTheTimes:

“When people lose at blackjack or some other game, and they later realize the odds were with the house, does the government file fraud charges against the casinos?

Goldman was running a casino, and they were the bookie on a bet between two parties…”

Very good comparison. However you conveniently chose to ignore that one party came to the table with loaded dice and the casino knowingly approved that.

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By: sklein11 http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-14010 Sat, 24 Apr 2010 16:00:38 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-14010 As a non-financial professional, I’m not clear on the point of:”Here, then, is arguably Goldman’s biggest lie of omission: it never told ACA that the equity tranche didn’t exist.”

Is it that “didn’t exist” means “no investor was willing to take on the risk of the equity tranche?” If not, please explain. If so, then why would ACA assume that there was such an investor?

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By: STORYBURNcom_0 http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-14007 Sat, 24 Apr 2010 13:44:21 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-14007 Holy complicated, Batman! The subprime households are the lower box in the corner getting hosed

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By: Ghandiolfini http://blogs.reuters.com/felix-salmon/2010/04/23/goldmans-biggest-lie/comment-page-1/#comment-14001 Sat, 24 Apr 2010 09:09:12 +0000 http://blogs.reuters.com/felix-salmon/?p=3550#comment-14001 …sure enough, the banks had to bailed out, that domino effect would have been fatal, but

The banks should now bail out customers in distress and come to the party with lifeboat initiatives, they are the quick avenue, Feds and Treasuries have an admin lag of note, worse than fiscal drag.

Maybe the banks will become humane, throwing the fish back into the water with those massive earnings’ reserves.

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