Goldman Email Describes ‘Frankenstein’ Derivatives; Tourre Brags about Selling Abacus to “widows and orphans”; SEC Confident; German Bank Drops Goldman
by ilene - April 24th, 2010 10:13 pm
Goldman Email Describes ‘Frankenstein’ Derivatives; Tourre Brags about Selling Abacus to "widows and orphans"; SEC Confident; German Bank Drops Goldman
Courtesy of Mish
Goldman Sachs claims it it dis not mislead clients. Its defense will not be very convincing in the face of revealing emails with "fabulous Fab" bragging about dumping Abacus bonds on widows and orphans.
Please consider Goldman’s Tourre E-Mail Describes ‘Frankenstein’ Derivatives
Fabrice Tourre, a Goldman Sachs Group Inc. executive director facing a fraud lawsuit in the sale of a mortgage-linked investment, said an index that facilitated derivatives trading in the market was “like Frankenstein.”
The so-called ABX index is “the type of thing which you invent telling yourself: ‘Well, what if we created a ‘thing,’ which has no purpose, which is absolutely conceptual and highly theoretical and which nobody knows how to price?’” Tourre said in a Jan. 29, 2007, e-mail released yesterday by Goldman Sachs. Watching the index fall is “a little like Frankenstein turning against his own inventor.”
In a March 7, 2007, e-mail Tourre describes the U.S. subprime mortgage market as “not too brilliant” and says that “according to Sparks,” an apparent reference to Daniel Sparks who ran Goldman Sachs’s mortgage business at the time, “that business is totally dead, and the poor little subprime borrowers will not last too long!!!”
A few months later, a June 13, 2007, e-mail shows Tourre claiming, “I’ve managed to sell a few Abacus bonds to widows and orphans that I ran into at the airport, apparently these Belgians adore synthetic ABS CDO2,” using short-hand for asset- backed collateralized debt obligations squared, or CDOs made up of tranches of CDOs containing asset-backed securities.
Goldman Sachs Readies Forceful Defense
The Washington Post is reporting Goldman Sachs readies forceful response against claims it misled clients
Goldman Sachs is preparing its most detailed defense yet to allegations that it misled clients in its mortgage securities business, arguing that the firm was unsure whether housing prices would rise or fall and did not take any action at odds with the interests of its clients.
Goldman prepared the 11-page document to serve as the basis for testimony that chief executive Lloyd Blankfein is scheduled to deliver Tuesday before the Senate Permanent Subcommittee on Investigations.
The Goldman paper describes debates among top executives in 2006 and 2007 over whether the firm should make investment decisions
by ilene - April 22nd, 2010 3:51 am
Courtesy of The Epicurean Dealmaker
The President: "Jiminy Jumpin’ Jesus, I can’t believe we’re gonna pay that madman! I got nukes up the ying-yang. Just let me launch one, for God’s sake!"
Commander Gilmour: "Sir! Are you suggesting that we blow up the moon?"
The President: "… Would ya miss it? [looks around the table] Would you miss it?"
— Austin Powers: The Spy Who Shagged Me
1.) For those of you who haven’t noticed, I’ve been missing lately. Sorry. Been busy. Day job, you know.1
2.) I have continued to be amazed by the sheer number of visits to this site during my bloggy hibernation. Either all your RSS readers are set to auto-refresh, or a hell of a lot of you need something much better to do. Don’t you have jobs? Or homes? Or at least demanding girlfriends?2
3.) I have been reliably informed that something scandalous has recently been unearthed which involves a recurring target of Your Formerly Diligent Blogosopher’s ruminations. I even believe the word "fraud" has been bandied about liberally.
Given that a) I have been occupied elsewhere, and b) I really couldn’t give a flying fuck in a rolling donut whether the Great Vampire Squid of West Street (new digs, natch) vanishes into the singularity or not, I frankly have not paid much attention to the scandal beyond a cursory perusal of the headlines and a couple of blog posts. Honestly, life is just too short.3
However, in the spirit of duty which compels Your Humble Servant to satisfy every bloggy whim my Peremptory Audience demands of me (and also because Natasha has temporarily left the hotel room to get more caviar and ice cubes), I will make the following brief observations:
A.) The parties which Goldman supposedly defrauded were large and supposedly sophisticated financial institutions. The managers of these institutions were or should have been paid quite large sums of money to, among other things, protect their stakeholders from fraud, unethical sales practices, and general office supply stealing. I have no sympathy whatsoever for the knuckleheads at ACA or IKB. And, frankly, neither should you.
B.) Whether the alleged fraud rises to the level of an actionable civil claim or simply represents unethical behavior is a question for a court of law. I am not qualified to judge, but the criteria which ultimately determine the nature of Goldman’s alleged offense…