Friday, April 16, 2010

The Goldman Case

Goldman is even more toxic than it was before: the SEC seemingly has a great case against Goldman for fraud in representing the contents of a CDO as being airtight (and having the imprimatur of experts--ACA) when in fact it was expressly designed to fail (and they were short it).

Felix Salmon points out that it's similar to the Magnetar trade, and it is. If it's sufficiently similar that Magnetar's trade was criminal, that means that UBS, Citigroup, JP Morgan Chase and Merrill Lynch are also guilty. And this line "According to marketing material and prospectuses, the banks didn't disclose to CDO investors the role Magnetar played" seems to indicate they may be.

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