Friday, April 23, 2010

The villain in a dumbed-down morality play
...# The claim against Goldman is that it did not reveal that hedge-fund manager John Paulson helped to select the securities. But at that time, Paulson was a virtual nobody (he became famous later as he made billions by betting against the housing market). As John Tamny notes in Real Clear Markets: ‘Back then, Paulson was not taken seriously, and if his role had been known, it’s a fair bet that client demand for Abacus would have been even greater.’ So why did Goldman have, as the SEC asserts, the obligation to inform potential investors that he was on the other side? Yes, Paulson identified the securities he wanted to bet against, but not all were ultimately selected, as he did not have authority to make the final selections; ACA’s management had the final word, as even the SEC admits. Paulson could not get all the assets he wanted in the package, as there needed to be those on the other side of the trade who would agree to buy.

# The media are excited about the ‘billions’ involved. In fact, Paulson made about $1billion. Which, in the world of investment banking and toxic assets, is akin to Dr Evil’s ransom claim in the movie Austin Powers for ‘one… million… dollars’.

# Goldman itself lost money on the deal ($90million), making it a fraud to deceive… itself?...