![]() ![]() Tourre allegedly knew of Paulson & Co.'s undisclosed short interest and role in the collateral selection process. Tourre structured the transaction, prepared the marketing materials, and communicated directly with investors. The SEC alleges that Goldman Sachs Vice President Fabrice Tourre was principally responsible for ABACUS 2007-AC1. Goldman Sachs did not disclose Paulson & Co.'s short position or its role in the collateral selection process in the term sheet, flip book, offering memorandum, or other marketing materials provided to investors. had an economic incentive to select RMBS that it expected to experience credit events in the near future. Given that financial short interest, Paulson & Co. effectively shorted the RMBS portfolio it helped select by entering into credit default swaps (CDS) with Goldman Sachs to buy protection on specific layers of the ABACUS capital structure. The SEC's complaint alleges that after participating in the portfolio selection, Paulson & Co. hedge fund, which was poised to benefit if the RMBS defaulted, played a significant role in selecting which RMBS should make up the portfolio. The SEC alleges that undisclosed in the marketing materials and unbeknownst to investors, the Paulson & Co. District Court for the Southern District of New York, the marketing materials for the CDO known as ABACUS 2007-AC1 (ABACUS) all represented that the RMBS portfolio underlying the CDO was selected by ACA Management LLC (ACA), a third party with expertise in analyzing credit risk in RMBS. based on a belief that the securities would experience credit events.Īccording to the SEC's complaint, filed in U.S. could take short positions against mortgage securities chosen by Paulson & Co. The SEC alleges that one of the world's largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. housing market as it was beginning to show signs of distress." Kenneth Lench, Chief of the SEC's Structured and New Products Unit, added, "The SEC continues to investigate the practices of investment banks and others involved in the securitization of complex financial products tied to the U.S. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party." "The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO. ![]() Yet again, it is a story of the fat cats and the thin cats – and a reminder of how Milton Friedman’s maxim applies to the bank bailouts: socialism for the rich, free enterprise for the poor.The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). James speaks to all the major players, including DA Cyrus Vance, who has the good grace to look embarrassed. Perhaps the truly incredible thing is that Chanterelle Sung, an employee of the DA’s office, is daughter of the Abacus bank’s founder, Thomas Sung, and had to withdraw from the case. ![]() The court authorities even staged a grotesque “chain-gang” court appearance for the bank’s staff, in handcuffs and connected elbow restraints, shuffling miserably along, hiding their faces from the flashbulbs – unthinkable for black people and, of course, never considered for white people. But the DA was mentally measuring up this Chinese mom-and-pop firm for uniforms with little arrows. Big guns such as Goldman Sachs need only get a fine and a butterfly-wingbeat slap on the wrist. It was the first and only federal bank prosecution since BCCI in 1991. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |