• 16 Apr 2010 at 1:25 PM

Goldman Sachs’s ABACUS Pitch Book

Via Reuters, the CDO created by John Paulson which was in turn marketed to Goldman investors (sans the 411 that Paulson&Co was betting against it). Nothing new for the investors who lost a billion or so on this thing but in they event they’re looking for some JO&C material this afternoon, here ya go.

Abacus 2007-Ac1 Flipbook 20070226

26 comments (hidden to protect delicate sensibilities)
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Comments (26)

  1. Posted by Anonymous | April 16, 2010 at 1:44 PM

    Awesome. If you can get your hands on the Prospectus, even better.

  2. Posted by LB | April 16, 2010 at 1:47 PM

    Just read the complaint. It seems pretty obvious that GS knowingly omitted material information in their ABACUS sales pitch. Here’s the tip-off: Tourre was internally referring to this as the ACA/Paulson portfolio while externally going out of his way to not mention Paulson. Why would he bother doing that if he didn’t think it material as to whether or not an investor would invest? Will be a tough case to prove, but props to the SEC for growing a pair.

    But as always, the real fault here lies with the ratings agencies…

  3. Posted by Anonymous | April 16, 2010 at 1:53 PM

    @2 couldn’t agree more re: the rating agencies. That being said …these guys are thieving bastards

  4. Posted by Anal_yst | April 16, 2010 at 2:01 PM

    Not a lawyer and I realize its largely boiler-plate language, but page 8 seems to cover the issues the SEC’s alleging, at least in-part, no?

  5. Posted by creditquant | April 16, 2010 at 2:02 PM

    @3 If you’re wading through garbage to find the worst pieces of crap that will pass for 360 WARF and structure them into a CMO, I don’t think you can blame rating agencies. It sort of follows that it will under-perform compared to the BBB/360 benchmark.

  6. Posted by creditquant | April 16, 2010 at 2:04 PM

    @4 i don’t think issue is that the CMOs blew up due to systematic risk (or rating underestimating system risk). SEC is trying to nail them for the adverse selection – essentially building the opposite of an efficient portfolio.

  7. Posted by Anonymous | April 16, 2010 at 2:15 PM

    A lot of good the first 10 pages did for GS…

    It seems as if ACS did about the same due diligence as Fairfield Greenwich did with Madoff. If Paulson selected the assets in ABACUS, what did ACS do to earn their fee?

  8. Posted by aaaaa | April 16, 2010 at 2:19 PM

    @4 nah it doesn’t, pages 12,13,14 spell out very specifically that it’s ACA that creates the portfolio but if it was in fact Paulson as the sec alleges, then that’s some shady shit. if i bought the thing i’d def sue GS

  9. Posted by Tax Chick | April 16, 2010 at 2:39 PM

    GS may be on the hook for the crime, but Paulson seems like the scumbag who reaped the fraudulent gain off the two named investors.

  10. Posted by Guest | April 16, 2010 at 2:45 PM

    Serious question about the whole scheme: Did picking the more risky RMBS’s increase the return/potential return on Paulson’s tranches at all? Or did they not affect the yield of the tranch and only serve to ensure that the CDO would fail?

  11. Posted by Anon4Life | April 16, 2010 at 2:52 PM

    Tax Chick >/< OptionTrader

    ??

  12. Posted by Anonymous | April 16, 2010 at 2:55 PM

    Wow. Page 60. Head of Structured Finance Risk at ACA was previously at Radian and – prior to that – AIG. How much does the trifecta pay?

  13. Posted by Pfluger the Barbarian | April 16, 2010 at 3:06 PM

    It was hard to read the disclaimer on the first two pages, but I assume it contained the standard language:

    “Any and all of the information in this presentation is from sources believed to be reliable, but we cannot assure that some or all of the information may be complete bullshit.”

  14. Posted by WSJevons | April 16, 2010 at 3:08 PM

    Anyone who read page 11 and still bought this POS without due diligence got what they deserved.

  15. Posted by Anal_yst | April 16, 2010 at 3:10 PM

    @8

    But ultimately, ACA is the firm who agreed to the composition of the portfolio, not Paulson, yes? Also, I’d like to think were I in a position to contemplate buying this deal, I’d do some research into the individual mortgages, alas, it seems ACA, the buyers, etc did no such research.

  16. Posted by Anonymous | April 16, 2010 at 3:18 PM

    oooooooooo contact information on the last page. this is gonna be fun!

  17. Posted by TGFD | April 16, 2010 at 3:27 PM

    From Dow Jones NewsWires…

    Two Goldman CLOs (Collateralized Loan Obligations…catchy, isn’t it) that were “in the works” today for a planned Monday release, are apparently “hitting the skids” and their future is now uncertain.

    Like CDOs, “CLOs work as a way for investors to take lower-rated debt off their own balance sheets and place it in a top-rated investment vehicle.”

    According to Goldman, “CLOs are different from CDOs because CLOs are made from corporate loans, not from (shitty) subprime mortgages.”

    “They’re much better” claimed the Goldman source. “Tailored for the pension-fund market.” The source wouldn’t elaborate further because of recent CDO fraud charges against Goldman.

    ——————————————————-

    In today’s environment, TGFD wonders how lower-rated debt can still somehow manage to become a top-rated investment vehicle.

    BTW, that guy Paulsen is a thief and belongs in jail, anyway.

    The Guy from Delaware

  18. Posted by Anonymous | April 16, 2010 at 3:47 PM

    Yes everyone should have done more DD, pulled apart individual mortgages, etc. etc. But no one did, and in early 2007 few in the market were doing serious analysis other than the 7 people that Michael Lewis is trying to canonize.

    Caveat emptor does not apply when there is fraud. That’s what this is about. Were there misleading statements, and if so were they material? The smoking gun is the equity. If GS intentionally misled ACA into believing that Paulson was involved in “picking” only to the extent it was a buyer of the equity tranche, then they’re hosed. That’s why ACA was at the table. Certainly the pitchbook never disclosed that ABACUS was really the other side of a Paulson trade. Knowing things like that tends to be important.

    No wonder they exported this 31 year old veep to London – from there he can swim to France and no extradition.

  19. Posted by Anonymous | April 16, 2010 at 3:51 PM

    @15 – my friend, read the complaint and you will understand why the “let the investor do its own due dilligence” argument is flawed. It looks to me that this entire affair was filled with misrepresentation and the SEC quotes emails to prove it. Hard to say that the issue is due dilligence, especially when a foreign institution is relying on reputable firms to provide them with accurate rather than false information – that’s why they dealt with Goldman and not with some bucket shop they never heard of before.

  20. Posted by Pfluger the Barbarian | April 16, 2010 at 4:16 PM

    @1819:

    Its all very simple, really. When the deals are assembled, the bankers know that their deals should be AAA. But everyone else out there, the rating agencies, the enhancers, etc. are idiots, you see, and its the job of the banker to explain to them why its AAA, and how stupid they are for not understanding its AAA. When they finally convince a savvy analyst out there that yes, Virginia, it is indeed a AAA, everyone is happy.

    Of course, if it blows up a year laters, its clear that the buyer, or enhancer, or rater should have examined each and every individual underlying mortgage document as well as the associated property.

    Its all buyer beware. The bankers simply do God’s work, and assemble these things with the best of intentions.

    Its the same with the Prius and the uncontrolled acceleration problem – woe on the purchaser for not conducting computerized system checks on the vehicle before buying it.

    The manufacturer should always be held harmless.

  21. Posted by Anal_yst | April 16, 2010 at 4:27 PM

    @20

    Bad analogy; almost all of the reports I’ve read (admittedly not too many as they’re largely repetitive) indicate just like with the Ford Explorer “blow out” issues, a little driver skill would have gone a long way, i.e. if your car speeds up, put it into neutral and apply the brake, duh.

  22. Posted by Pfluger the Barbarian | April 16, 2010 at 4:58 PM

    @analyst: Well, lets say I read some stories about how the cars could not be stopped, even if the key was turned to off, or the car was attempted to be placed into neutral. Would it still be a bad analogy?

    On the structured market, doesn’t its entire existence depend upon an investor, or rater, or enhancer being able to rely on representations concerning the composition of the pool? You can always say they should have gone a bit deeper, up until the point that every single underlying mortgage and property be examined.

    Of course, that would be impossible.

    And, I am not necessarily defending the rating factories, the enhancers, or even the purchaser here. I don’t know whether sufficient due diligence was performed. Insufficient information, you know….

  23. Posted by covey 01 | April 16, 2010 at 5:11 PM

    Ladies and Gentlemen, the crux of the ptoblem lays in two areas. Firstly the greed factor blinded most investors (myself included) and we had a serious failure of not knowning what the hell we were buying in the first place. It would seem obvious that Paulson and others were on top of the game and we just screwed up. The question is; who is really to blame? The investors who did not do their job or the bottom feeders who sold the crap in the first place? I know when I screwed up!

  24. Posted by TGFD | April 16, 2010 at 9:20 PM

    Anal_Yst@#21…

    TGFD doesn’t have a new car, but it’s my understanding that a lot of the new ones don’t have an ignition key. They have a button. It’s all electronic. No key to turn off in a emergency. Electronics control everything, even whether the transmission is allowed to be shifted into neutral (or park) while at speed, while in gear, and while the accelerator is depressed. Too much brake pedal and too much gas pedal at the same time is supposed to automatically shut-down the engine too.

    My point is…When the electronis fail, and the car becomes a ‘runaway’, WTF does the driver do?

    TGFD likes what Anonymous@#18 wrote…”Caveat emptor does not apply when there is fraud. That’s what this is about.”

  25. Posted by TGFD | April 16, 2010 at 9:39 PM

    I forgot to sign my #24 post.

    The Guy from Delaware

    p.s. Anal_Yst…Did you ever get that Caddy you were talking about last year?

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