Citi today paid out some of its DVA gains to settle SEC charges that it sold investors a CDO-squared that facilitated its own naked CDS purchases on the underlying CDOs, while misleading investors into thinking that an independent collateral manager selected the underlying portfolio. If my grandmother reads Dealbreaker she’s now stopped.
Anyway. I’m proud of my time at Goldman, which I thought was a great place filled with smart and ethical people (really) and which also was a market leader in many areas, including paying fines for fraudulent CDO structuring fraud. In that line of business we were first both in time and in market share, settling Abacus for $550mm in July; JPMorgan’s $153.6mm Magnetar settlement came a week later and Citi didn’t get around to their $285mm entry (and Credit Suisse’s $2.5mm addition) until today.
Now, maybe it’s just my Goldman bias talking but I never really got the outrage at these things, which always seemed to come from importing an already incorrect understanding of how nonfinancial transactions work into a market-making, two-sided, financial markets context. But reading the Citi CDO documents, which are fascinating, I think makes it a little more comprehensible.
There are five points to which your free-floating rage could maybe attach:
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The U.S. Securities and Exchange Commission’s lawsuit against Fabrice Tourre should be thrown out, lawyers for the Goldman Sachs Group Inc. trader accused of misleading investors in a product linked to subprime mortgages told a federal judge. Andrew Rhys Davies, Tourre’s lawyer, said yesterday that the SEC is trying to circumvent a U.S. Supreme Court ruling issued in June, Morrison v. National Australia Bank, that limits the reach of civil claims for acts occurring outside the U.S. “The SEC is attempting to do an end run around Morrison,” Rhys Davies told U.S. District Judge Barbara Jones in Manhattan. [Bloomberg]
This time by ACA. Continue reading »
So there’s this guy. A mild-mannered professor who retired a decade ago and decided he would serve as an independent director of this new booming financial product called a CDO. He collected a few thousand bucks a year for basically signing some documents. Sounded like a decent gig and a good way to make some extra pocket change. Continue reading »
The following post is by Dealbreaker reader and commenter Infinite Guest.
Whether they could have avoided it, I don’t know–today’s Securities and Exchange Commission acts like a wounded animal–the management of Goldman, Sachs & Co. made a strategic error by failing to cultivate a closer relationship with the new regime. That much is evident from the fact that the suit came as a surprise. Chairman Schapiro is quite capable of partnering with industry: Had Goldman done better, earlier, there might never have been a lawsuit. Popular wisdom says that Goldman should settle. I disagree. Although both parties understand that cooperation beats enmity, the SEC chose not to cooperate; and now, Goldman’s best strategy is to respond in kind. Continue reading »
To everyone shrieking “Goldman Sachs broke the law,” “Goldman Sachs is evil,” “Goldman Sachs is this,” “Goldman Sachs is that,” to the SEC, to the peasants, to the window, to the wall, one voice of reason– the only one that counts– is here to say “Stuff it. These guys are cool.” His (nick)name is Bubba and in a wide-ranging interview with Maria Bartiromo that will air on CNBC this afternoon, he told her we should all consider getting off GS’s nuts (vis-à-vis BS lawsuits). Continue reading »
He’s got this one covered. Letter to investors via Absolute Return. Continue reading »
