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http://www.mcclatchydc.com/2010/04/30/93252/goldman-sought-to-shed-risky-mortgage.html http://www.mcclatchydc.com/2010/04/30/93252/goldman-sought-t... Viniar m

by kls 16y ago

http://www.mcclatchydc.com/2010/04/30/93252/goldman-sought-to-shed-risky-mortgage.html http://www.mcclatchydc.com/2010/04/30/93252/goldman-sought-t... Viniar made no mention of Goldman's short bets or the $266 million gain. Instead, he said the market had seen "a little bit of nervousness" but the housing weakness had been "so far largely contained. The did not disclose material analysis that they where using to hedge the company against mortgage backed securities and explaining to analyst and clients that the losses where "so far largely contained". That is cut and dry fraud. They knew it was not contained and that is why the where bailing as fast as possible.

yummyfajitas 16y ago
You are confusing Goldman's prop desk and their sales desk. The prop desk is not required to inform clients of their positions. The sales desk is required to disclose information on the composition of the security they are selling. I.e.: "Bond X is comprised of 523 loans from Florida, 247 loans from Texas, etc, all rated AAA". Your link does not suggest they failed to do this. In much the same way, if I think AAPL will tank, I am legally permitted to sell my shares.
- kls 16y ago
  I am not confused about anything they where fined for civil fraud. They should have been charged with criminal fraud because they where culpable in allowing the racket to be structured. http://www.sec.gov/news/press/2010/2010-59.htm http://www.sec.gov/news/press/2010/2010-59.htm from the article: Tourre structured the transaction, prepared the marketing materials, and communicated directly with investors. Tourre allegedly knew of Paulson & Co.'s undisclosed short interest and role in the collateral selection process. 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.
  - yummyfajitas 16y ago
    You are actually very confused. Your previous link asserted that Goldman shorted bonds which were about to tank, and this was fraud. (It isn't.) Your current link claims Goldman defrauded themselves (for the benefit of Paulson and others) on a bond they took a long position on. Also, Goldman wasn't fined for fraud. Goldman paid the SEC to make the case go away, while admitting no guilt. (The SEC also gained quite a bit from this. While they were making headlines chasing after goldman, the media mostly ignored their porno scandal. http://www.nydailynews.com/money/2010/04/23/2010-04-23_porn_among_daily_duties_of_top_sec_honchos_sez_report.html http://www.nydailynews.com/money/2010/04/23/2010-04-23_porn_... )
    - kls 16y ago
      Fined settled your playing semantics, both articles where to show that their was material deception of investors taking place by Goldman. A case was brought against Goldman and Goldman had to pay an amount for fraud. Their is no confusion, they defrauded investors, failed to disclose their dealing at the back of the house and this is illegal. Both articles show that they engaged in it and the latter shows with no doubt that it is illegal to do so. You asked What did they fail to disclose and I provided you with references to show you what they failed to disclose. No confusion, we can argue in circles if you don't like the facts but there they are in black and white. The porn scandal is irrelevant to whether or not Goldman committed fraud. Specifically from the first article, where the fraud was mentioned: However, Goldman's limited disclosures in the offering circulars it gave the investors that bought its mortgage securities could cause legal problems. At issue is whether Goldman's bets against the housing market were so "material," or relevant to investors, that their disclosures could have convinced them not to buy its products. Without purchasers for its risky securities, Goldman's exit strategy would have flopped.
      - yummyfajitas 16y ago
        No, the first article shows Goldman engaged in prop trading. That's not a crime, or fraud. That's what every single person in the financial markets does - they sell stuff to other people when they expect it to go down, and buy stuff from other people when they expect it to go up. Are you guilty of fraud if you sell AAPL before it goes down? The second article showed Goldman didn't disclose something that no one has even been forced to disclose before (identity/motives of the counterparty). In fact, it's often illegal to disclose this. They did disclose the exact composition of the product they sold (and bought for themselves), and by the nature of a synthetic CDO, there was always someone betting against the bonds going into it. But I'm really curious - can you explain to me why Goldman would defraud themselves? Remember, Goldman bought a piece of ABACUS and lost money on the deal as a result. Why would they buy a bond they knew was designed to fail? The Stanford scandal and the Porn scandal are relevant to the SEC's motives - just by pure coincidence, they hit an unpopular company ("giant vampire squid") with a really weak case, alleging the company defrauded themselves, at the exact time they were about to get a bunch of negative media attention. I'm sure the two were completely unrelated. As for fined/settled, it's not semantics. If the SEC had a solid case, they would have demanded Goldman admit guilt. Goldman just paid a bunch of money to get their name out of the media and avoid uncertainty.

by kls 16y ago

yummyfajitas 16y ago

You are confusing Goldman's prop desk and their sales desk. The prop desk is not required to inform clients of their positions. The sales desk is required to disclose information on the composition of the security they are selling. I.e.: "Bond X is comprised of 523 loans from Florida, 247 loans from Texas, etc, all rated AAA". Your link does not suggest they failed to do this. In much the same way, if I think AAPL will tank, I am legally permitted to sell my shares.

kls 16y ago
I am not confused about anything they where fined for civil fraud. They should have been charged with criminal fraud because they where culpable in allowing the racket to be structured. http://www.sec.gov/news/press/2010/2010-59.htm http://www.sec.gov/news/press/2010/2010-59.htm from the article: Tourre structured the transaction, prepared the marketing materials, and communicated directly with investors. Tourre allegedly knew of Paulson & Co.'s undisclosed short interest and role in the collateral selection process. 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.
- yummyfajitas 16y ago
  You are actually very confused. Your previous link asserted that Goldman shorted bonds which were about to tank, and this was fraud. (It isn't.) Your current link claims Goldman defrauded themselves (for the benefit of Paulson and others) on a bond they took a long position on. Also, Goldman wasn't fined for fraud. Goldman paid the SEC to make the case go away, while admitting no guilt. (The SEC also gained quite a bit from this. While they were making headlines chasing after goldman, the media mostly ignored their porno scandal. http://www.nydailynews.com/money/2010/04/23/2010-04-23_porn_among_daily_duties_of_top_sec_honchos_sez_report.html http://www.nydailynews.com/money/2010/04/23/2010-04-23_porn_... )
  - kls 16y ago
    Fined settled your playing semantics, both articles where to show that their was material deception of investors taking place by Goldman. A case was brought against Goldman and Goldman had to pay an amount for fraud. Their is no confusion, they defrauded investors, failed to disclose their dealing at the back of the house and this is illegal. Both articles show that they engaged in it and the latter shows with no doubt that it is illegal to do so. You asked What did they fail to disclose and I provided you with references to show you what they failed to disclose. No confusion, we can argue in circles if you don't like the facts but there they are in black and white. The porn scandal is irrelevant to whether or not Goldman committed fraud. Specifically from the first article, where the fraud was mentioned: However, Goldman's limited disclosures in the offering circulars it gave the investors that bought its mortgage securities could cause legal problems. At issue is whether Goldman's bets against the housing market were so "material," or relevant to investors, that their disclosures could have convinced them not to buy its products. Without purchasers for its risky securities, Goldman's exit strategy would have flopped.
    - yummyfajitas 16y ago
      No, the first article shows Goldman engaged in prop trading. That's not a crime, or fraud. That's what every single person in the financial markets does - they sell stuff to other people when they expect it to go down, and buy stuff from other people when they expect it to go up. Are you guilty of fraud if you sell AAPL before it goes down? The second article showed Goldman didn't disclose something that no one has even been forced to disclose before (identity/motives of the counterparty). In fact, it's often illegal to disclose this. They did disclose the exact composition of the product they sold (and bought for themselves), and by the nature of a synthetic CDO, there was always someone betting against the bonds going into it. But I'm really curious - can you explain to me why Goldman would defraud themselves? Remember, Goldman bought a piece of ABACUS and lost money on the deal as a result. Why would they buy a bond they knew was designed to fail? The Stanford scandal and the Porn scandal are relevant to the SEC's motives - just by pure coincidence, they hit an unpopular company ("giant vampire squid") with a really weak case, alleging the company defrauded themselves, at the exact time they were about to get a bunch of negative media attention. I'm sure the two were completely unrelated. As for fined/settled, it's not semantics. If the SEC had a solid case, they would have demanded Goldman admit guilt. Goldman just paid a bunch of money to get their name out of the media and avoid uncertainty.