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Anybody see this article? Scary stuff.

  • 23-04-2010 09:06AM
    #1
    Registered Users, Registered Users 2 Posts: 336 ✭✭


    http://www.guardian.co.uk/business/2010/apr/18/goldman-sachs-regulators-civil-charges

    A quote from it

    "For the Goldmans case is in some ways the most damaging. The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured."


Comments

  • Closed Accounts Posts: 457 ✭✭hiorta


    Also known as theft.


  • Registered Users, Registered Users 2 Posts: 4,236 ✭✭✭Dannyboy83


    Did they know they would be bailed out?
    Lehman Brothers didn't seem to know; It would seem to be a very big stumbling block in the theory of Libertarianism.

    The idea that they would act responsibly and self regulate simply hasn't seemed to happen in reality.


  • Closed Accounts Posts: 4,584 ✭✭✭digme


    Dannyboy83 wrote: »
    Did they know they would be bailed out?
    Lehman Brothers didn't seem to know; It would seem to be a very big stumbling block in the theory of Libertarianism.

    The idea that they would act responsibly and self regulate simply hasn't seemed to happen in reality.
    They actually told the government, if you don't bail us out, we will bring down your entire economy.And they said it on camera too.


  • Registered Users, Registered Users 2 Posts: 879 ✭✭✭woodseb


    davepatr07 wrote: »
    http://www.guardian.co.uk/business/2010/apr/18/goldman-sachs-regulators-civil-charges

    A quote from it

    "For the Goldmans case is in some ways the most damaging. The Icelandic banks, Anglo Irish bank and Lehman were all involved in opaque deals and rank bad lending decisions – but Goldman allegedly went one step further, according to the SEC actively creating a financial instrument that transferred wealth to one favoured client from others less favoured."

    the 'wealth transfer' only happened after the subprime market collapsed, which one client accurately predicted and the other didn't -that's the market, two parties disagreeing on value and agreeing to trade

    after reading the facts of the case (ie. not an article in the guardian who love GS so much they devote a whole section to it), i think goldman has very little to answer for and this prosecution is political


  • Registered Users, Registered Users 2 Posts: 94 ✭✭BrownianMotion


    woodseb wrote: »
    the 'wealth transfer' only happened after the subprime market collapsed, which one client accurately predicted and the other didn't -that's the market, two parties disagreeing on value and agreeing to trade

    after reading the facts of the case (ie. not an article in the guardian who love GS so much they devote a whole section to it), i think goldman has very little to answer for and this prosecution is political

    Haven't really looked into the finer details too much but from what I've read it appears Goldman were actively marketing a fund which was being shorted by those who partly selected the assets underlying the fund.

    This would indicate the prosecution is more than political. However my only information on the subject is from mainstream sources so I can see how it would be biased.

    Any nice links which will give the real story?


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  • Closed Accounts Posts: 1,647 ✭✭✭MaceFace


    woodseb wrote: »
    the 'wealth transfer' only happened after the subprime market collapsed, which one client accurately predicted and the other didn't -that's the market, two parties disagreeing on value and agreeing to trade

    after reading the facts of the case (ie. not an article in the guardian who love GS so much they devote a whole section to it), i think goldman has very little to answer for and this prosecution is political

    I think you might be right in the political nature of the case, but that should not excuse the potential fraud that occurred.
    To be straight, John Paulson picked mortgages to throw into CDOs that were pitched to third parties by GS who were not aware that Paulson was shorting them.
    If this is true and GS were aware, then while the legality of such a move is questionable, the morality is not, and it further demonstrates the blatant disregard the major financial companies still have for anyone.

    Maybe you can explain some of these "facts" that allow you to dismiss what has allegedly gone on?


  • Registered Users, Registered Users 2 Posts: 879 ✭✭✭woodseb



    Any nice links which will give the real story?

    ...some nightime reading for you;)

    here's the SEC case

    and goldman's rebuttal - the last few pages of this sums up their case

    it's true that paulson partly selected some of the securities, but the main investor on the other side also had a role in this and both parties went in completely with their eyes open as to what they were each betting $1bln on. There seems to be some dispute over what the GS employee told the other investor on the positioning of Paulson though there is conflicting evidence on that

    as for the political angle - the SEC vote to charge Goldman was down party lines and it is definitely a populist move given the amount of politician that have jumped on the bandwagon on this - article here

    in the end, i think if any of the banks who lost money on this get cash back it is wrong as they are been refunded for effectively making terrible subprime loans to people who couldn't pay


  • Registered Users, Registered Users 2 Posts: 879 ✭✭✭woodseb


    MaceFace wrote: »
    I think you might be right in the political nature of the case, but that should not excuse the potential fraud that occurred.
    To be straight, John Paulson picked mortgages to throw into CDOs that were pitched to third parties by GS who were not aware that Paulson was shorting them.
    If this is true and GS were aware, then while the legality of such a move is questionable, the morality is not, and it further demonstrates the blatant disregard the major financial companies still have for anyone.

    Maybe you can explain some of these "facts" that allow you to dismiss what has allegedly gone on?

    facts are on the post above,

    but to summarise my POV:
    - paulson didn't pick all of the securities, the party that was long also did
    - even if they were aware he was shorting it, he wasn't that well know at the time - he only became famous after the fact when he was proved right that subprime collapsed
    - the side that was long were buying $1bln worth of mortgages. To have someone to sell them $1bln implicitly means someone else believes they are overvalued

    Paulson was eventually proved right by the credit crunch, it would have been no more immoral if subprime didn't collapse and paulson lost massive amounts


  • Closed Accounts Posts: 1,647 ✭✭✭MaceFace


    woodseb wrote: »
    facts are on the post above,

    but to summarise my POV:
    - paulson didn't pick all of the securities, the party that was long also did
    - even if they were aware he was shorting it, he wasn't that well know at the time - he only became famous after the fact when he was proved right that subprime collapsed
    - the side that was long were buying $1bln worth of mortgages. To have someone to sell them $1bln implicitly means someone else believes they are overvalued

    Paulson was eventually proved right by the credit crunch, it would have been no more immoral if subprime didn't collapse and paulson lost massive amounts

    I agree with those facts, and I would not put any blame with Paulson, but I draw a different opinion, that if GS were putting out these CDOs without disclosing that there was someone betting against it and that person had helped construct the makeup of those CDOs, then that is unethical.

    Would the clients still had gone ahead with the purchase if they new that information?


  • Registered Users, Registered Users 2 Posts: 879 ✭✭✭woodseb


    MaceFace wrote: »
    I agree with those facts, and I would not put any blame with Paulson, but I draw a different opinion, that if GS were putting out these CDOs without disclosing that there was someone betting against it and that person had helped construct the makeup of those CDOs, then that is unethical.

    I disagree, it happens all the time that people who want to buy CDOs help construct them in the expectation of getting long so i don't see why there should be more stringent rules for those on the short side. As i said, it is implicit in any deal that there is someone betting against you
    MaceFace wrote: »
    Would the clients still had gone ahead with the purchase if they new that information?

    well they still went ahead with the $1bln deal after separately analysing themselves every single security in the portfolio and satisfied themselves that it was worth the price paid - i don't really see the information that a previously unknown hedge fund was on the other side would have changed things drastically. In hindsight, of course it was obvious that Paulson had correctly called the market and you wouldn't have bet against him.


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