Goldman CDO case could be tip of iceberg

[UpInArms]

Source: Reuters

(Reuters) - The case against Goldman Sachs Group Inc (GS.N) over a 2007 mortgage derivatives deal it set up for a hedge fund manager could be just the start of Wall Street's legal troubles stemming from the subprime meltdown.

The U.S. Securities and Exchange Commission charged Goldman (GS.N) with fraud for failing to disclose to buyers of a collateralized debt obligation known as ABACUS that hedge fund manager John Paulson helped select mortgage derivatives he was betting against for the deal. Goldman denied any wrongdoing.

The practice of creating synthetic CDOs was not uncommon in 2006 and 2007. At the tail end of the real estate bubble, some savvy investors began to look for more ways to profit from the coming calamity using derivatives.

<snip>

"Merrill Lynch teamed up with one of its most prized hedge fund clients -- an infamous short seller that had helped Merrill Lynch create four other CDOs -- to create Norma as a tailor-made way to bet against the mortgage-backed securities market," Rabobank said in its complaint filed on June 12 in the Supreme Court of New York.

Read more: http://www.reuters.com/article/idUSTRE63G21Z20100417

[bluesmail]

1. I'd write something positive but I've been burnt way too many times in the past. (eom)

[UpInArms]

3. I, too, am not holding my breath, but

I will continue to hope that the wheels of justice will grind very fine, indeed.

[CountAllVotes]

2. well well wellllllll ....

:dem: :kick: & recommend.

[dotymed]

4. lol...They're still" too big to fail"

and we subsidize all of their corporate theft.....:wtf:

[Po_d Mainiac]

5. The Wall Street Transparency and Accountability Act of 2010

This is landmark reform legislation that will bring 100 percent transparency to an unregulated $600 trillion
market, close all loopholes and keep jobs on Main Street. This will protect taxpayers, jobs, consumers and the
global economy, and will go further than any other proposal to prevent future bailouts.
Historic Reform of the Derivatives Market

Brings 100 Percent Transparency to Market with Real-Time Price Reporting:
Wall Street will no longer be able to make excessive profits by operating in the dark. Exposing these markets to
the light of day will put this money where it belongs – on Main Street. The public will see what is being traded,
who is doing the trading and, most importantly, regulators can go after fraud, manipulation and excessive
speculation.

Lowers Systemic Risk by Requiring Mandatory Trading and Clearing:
Trading and clearing of swaps lower risks and make the entire financial system safer. Transactions, determined
by the regulator, will be required to clear through a clearinghouse. In addition, these transactions must be traded
on a regulated exchange, which will provide further market transparency.

Prevents Future Bailouts and Address “Too Big to Fail”:
Banks need to be kept in the business of banking. The taxpayer funds used to bail out AIG and other Wall Street
firms will never be used for this purpose again. The Federal Reserve and FDIC will be prohibited from
providing any federal funds to bail out Wall Street firms who engage in risky derivative deals.

Closes Loopholes:
Loopholes have allowed far too many to avoid the law of the land or set up shell companies to claim
exemptions. This bill gives regulators the authority to close any loophole they find, protecting the markets,
taxpayers and the economy.

Protects Jobs on Main Street:
The interests of Main Street will be protected. Commercial businesses and manufacturers who use these markets
and customized contracts to manage risk will still be permitted to do so without imposing additional margin
costs. This will protect American jobs and keep consumer costs low.

Protects Municipalities and Pensions:
Swaps dealers will have a “fiduciary duty,” just like investment advisers, that will require the interests of
municipalities and pension retirement funds be put first; ensuring Wall Street doesn’t take advantage of Main
Street and taxpayers.

Regulates Foreign Exchange Transactions:
Foreign exchange swaps will be regulated like all other Wall Street contracts. At $60 trillion, this is the second
largest component of the swaps market and must be regulated.

Increases Enforcement Authority to Punish Bad Behavior:
Regulators will be given broad enforcement authority to punish bad actors that knowingly help clients defraud
third parties or the public such as when Wall Street helped Greece use swaps to hide the true state of the
country’s finances.

Full legislative text is available http://ag.senate.gov/site/legislation.html
The Wall Street Transparency and Accountability Act of 2010
Senate Committee on Agriculture, Nutrition, and Forestry, Chairman Blanche Lincoln

............
Go Blanche...Hope like hell someones watching your 6

[Festivito]

21. Transparent 600T$ market is like a see-through elephant in a Mini Cooper.

Either way all you're going to see something that doesn't fit.

[AllyCat]

6. I've heard no end of complaining from people who lost in the market yesterday

because someone DARED to go after these thieves. Seriously, y'all...if we can't make money legally, we need to readdress our priorities.

[formercia]

26. It's not about making Money

It's about making obscene amounts of Money.

[AllyCat]

33. The comments I've heard are from "progressives" who are upset how

much they've lost on their funds on Friday in the market. They are excited they made $800 the quarter before, now upset they lost in one day, yet fail to see that Goldman (and others) have made off and continue to make off with loads of cash they could not even dream about. We are being played for fools, just so we can have the illusion of making some money on our 401Ks.

[formercia]

35. We get just enough dregs to prevent Wall Street being stormed.

If the Teabaggers really knew the truth, they would burn it to the ground.

[icee]

7. One thing is for absolute certain: Goldman will have the best,

although not the most honest, lawyers defending it. The SEC will have half-educated politicos prosecuting. Goldman Sachs may be a real good bet right now. Although this will take a lot of time. Look for them to settle and then move forward with even better criminal activities. And John Paulson is laughing his azz off.

[MkapX]

8. America is for the working class not the wealthy

I swear there is nothing the wealthy can do to redeem itself in my eyes. I'm so sick of the super wealthy in their country. While normal americans can't pay for their college or medical expenses...these idiots are throwing money around like it's toy monopoly money! I have no mercy for a business that goes belly up when they were handed out 200,000 dollars in bonuses to their board of directors. Not like the housing crisis hurt these people any they still get to keep their 5 mansions in California and Miami Beach along with their 3 yachts and 2010 Bentley's. Hope the court comes down hard on Fraudman and Sachs

[UpInArms]

13. welcome to DU, MkapX!

glad to have you amongst us!

:hi:

[CountAllVotes]

16. Welcome to the DU MkapX

:hi: :hi: :hi: and you are so right - these people think of themselves as being "the super class" now.

Super class eh? :grr:

:kick:

[ozymandius]

9. Priorities people! Priorities!

Let a criminal complaint be filed then we will really have some fun.

[ozymandius]

10. Thank you for this news.

K&R

[UpInArms]

14. Hiya Ozy! I am always hopeful that the real criminals in this mess will

finally have their fingerprints taken, be allowed to post bond, and then be tried by a true jury of their peers before serving a life sentence on 10-thread count sheets.

:grouphug:

[ozymandius]

15. Ten thread count sheets? You're too generous.

I wouldn't allow sheets at all. Their prison garb would be hairshirts and burlap underwear. Maybe through the prison system's creative and demeaning varieties of currency they can get better threads.

[UpInArms]

17. hairshirts and burlap ...

youch!

okay - I'd be happy to do it your way.

:D

[dotymed]

23. At the least

they should be in a privatized maximum security prison...not club fed.

[BrklynLiberal]

11. Wow! I worked for themf rom 1982-1991. It was SUCH a different

place back then. There was a control war starting between the Investment Bankers and the Brokers... I guess they both lost in the long run.

Back then Robert Rubin and Jon Corzine were just among a list of names that we saw on lists of execs.

[northernlights]

12. we can only hope and pray

Also that various countries and pension funds that took the losses start fighting back a la Germany.

Even Goldman's lawyers wouldn't be able to fend off a feeding frenzy of pissed off countries and class action suits.

[defendandprotect]

18. k-

[bemildred]

19. Duh, ya think? nt

[lib2DaBone]

20. Asset Strppers, Hedge Fund Hyenas....Wall Street Greed and Abusives...

..the game goes on. Even the most modest form of regulations will meet Mitch McConnel and his Republican friends who will oppose any atempt to stop the abusive greed of Wall Street.

[No Elephants]

22. Remember Jack Abramoff?

He got a very light sentence. Supposedly, that was in return for his fingering many folk in Congress who were complicit in his scheme so the gubbamint could send them up the river. Supposedly, the ones being talked about at the time of his light sentencing had been only the tip of the iceberg.

Quick: name me all the folks Abramoff named BELOW the tip of the iceberg. Hell, there was barely a tip.

Moral #1: A bird in the hand is worth AT LEAST two that are SUPPOSEDLY in the bush.

Moral #2: These are the days of global warming. These day, some icebergs have nothing BUT tips.


If it happens, great. But, I'm not holding my breath. Let's see if anyone from Goldman Sachs even gets punished significantly. For instance, how many got punished from Enron, Lay and one other guy? And only one of them went to jai.

[flyarm]

24. Why is this case not criminal instead of a civil case????????

there is no excuse for that..none.

And why do we get Geithner on our Sunday TV when he was the guy who over saw this shit????????

It is all a dog and pony show..nothing more.

[liberation]

28. It is a small civil case, most people are again trying to make a mountain of a mole hill

Yeah, remember when people were crooning about "Fitzmas?"

I would love to prove wrong, but... it seems even the release of the presser had been consulted with GS first.

[flyarm]

29. I don'tfeel like re-writing this as I am having computer problems at present but see here:

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=8171058&mesg_id=8171503

[SOS]

25. Open the floodgates!

Hopefully every single buyer of these crooked CDOs will file a lawsuit against Goldman.

[Number_Six]

27. Fire TWO!

...to use an old phrase from my earlier days, yes. Let's sit back and hope the SEC torpedoes a few more of these greedy Randian pigs.

Popcorn? Anyone?

[retired af major]

30. This is freakin awesome ...

I'd love to see a lot more of this use of our tax money. I approve of catching, prosecuting and punishing crooks. Dylan Ratigan should get some satisfaction from this. I hope the perps get a sentence worthy of their crime.

[ooglymoogly]

31. And the world, we'll call it the Titanic, is sailing straight

into it, Eyes wide open, iceberg fully detected.

[TheWatcher]

32. I find it interesting that the "All Is Well" Brown Shirts have not marched into this thread yet.

I suppose they are too busy peddling the Geithner Happy Talk and licking his boots for "saving" their perception of "Accepted Reality".

:rofl:

[Tansy_Gold]

34. They'll be here, never fear. Just keep watching. ;-) n/t