5 ms·

Have you read the sales documents? They list the reference portfolio--every single bond. So you're arguing that both sides knew that ratings agencies were going

Have you read the sales documents? They list the reference portfolio--every single bond. So you're arguing that both sides knew that ratings agencies were going to incorrectly rate all this stuff BBB. The only missing datum is, allegedly, who constructed the portfolio. However, Paolo Pellegrini, the SEC's main source, says that he had a meeting specifically to disclose exactly that information. The big news here is that ACA looks really pathetic. They're saying "We had all the fundamental information we needed to judge the merits of this transaction. We could investigate every bond in the reference portfolio, and even every underlying mortgage. Our quants could build a model that would tell you exactly what would happen for any given default rate, interest rate, home price fluctuation, war, natural disaster, or act of god. But we didn't know that some know-name merger arb who liked to dabble in real estate derivatives was on the other side of the trade. If we'd known that, we would have been terrified." I mean, come on.

jfager 17y ago
I just don't understand why the fact that ACA and the longs are pathetic and should have known they were getting screwed materially influences the question of whether or not Goldman committed fraud. If they did (and it seems pretty clear that's the case), they should get off because they're an alpha dog?
- byrneseyeview 17y ago
  It's only fraud if it is fraudulent not to tell ACA that some no-name hedge fund is on the other side of their trade. The ACA guys got paid big bucks to research their investments, not to make guesses based on how scary their counterparties were. It would be like a professional baseball team whose entire model for winning was that they'd only play games against Little League teams, but they'd sue the other team if they turned out to be good.
  - jfager 17y ago
    So your claim is that it's not fraudulent that Goldman lied to ACA saying Paulson was going to end up long on Abacus, or that Goldman lied to the real longs that ACA was solely responsible for selecting the reference portfolio?

jfager 17y ago

I just don't understand why the fact that ACA and the longs are pathetic and should have known they were getting screwed materially influences the question of whether or not Goldman committed fraud. If they did (and it seems pretty clear that's the case), they should get off because they're an alpha dog?

byrneseyeview 17y ago
It's only fraud if it is fraudulent not to tell ACA that some no-name hedge fund is on the other side of their trade. The ACA guys got paid big bucks to research their investments, not to make guesses based on how scary their counterparties were. It would be like a professional baseball team whose entire model for winning was that they'd only play games against Little League teams, but they'd sue the other team if they turned out to be good.
- jfager 17y ago
  So your claim is that it's not fraudulent that Goldman lied to ACA saying Paulson was going to end up long on Abacus, or that Goldman lied to the real longs that ACA was solely responsible for selecting the reference portfolio?