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by Ashraf Laidi
Posted: Feb 22, 2010 5:00
Comments: 2338
Posted: Feb 22, 2010 5:00
Comments: 2338
Forum Topic:
USD
Discuss USD
Famous saying of Doctor Samuel Johnson:
""Depend upon it, sir, when a man knows he is to be hanged in a fortnight, it concentrates his mind wonderfully."
its like when u gain too much influence in sphere then ur influence must constraint well GS in the case of greek and the cdo backed by rmbs is just a declinaison of financial uses of liquidity injection for regional extension and integration.
MAC if u think it is not going to finish quietly so what do u make of active us diplomacy in the balkan and eastern europe since2003 under walker bush. dont u missing some details of the dynamic that pushed otc CDS granted contract in esatern europe.
lets go back tio97 during asian fianacial crisis and its impact on eastern eu rope. no book talks about it and its a realty in term of capital in/outflows. its only resurgence and even if we r not fed with gvt contrat details one can overpass the non disclosure or the DISCLOSURE of such stuff.
two kingdom used to exist in the area of bulgaria romania and northern greece the valachy. their actual representation still exist today in the institutions representation and this is why i talked about US active diplomacy enhanced by some talk during chiemsee conference.
one astronomer was burned for heresy when he sustain that our closest universe is a close universe but open one when it come the infinity of the universe.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aE82mhgRJDdI
http://www.youtube.com/watch?v=bUtf_Q4dg9Q&feature=related
Asad
WASHINGTON (MNI) - Following is the text of excerpts of the Securities and Exchange Commission's complaint filed in U.S. District Court for the Southern District of New York, against Goldman Sachs and employee VP Fabrice Tourre, for a deal in which ACA Management LLC (ACA) and Hedge Fund Paulson & Co also played a role:
GS&CO AND PAULSON (of Paulson & Co.) DISCUSS A PROPOSED TRANSACTION
Paulson discussed with GS&Co possible transactions in which
counterparties to its short positions might be found. Among the
transactions considered were synthetic CDOs whose performance was tied
to Triple B-rated RMBS. Paulson discussed with GS&Co the creation of a
CDO that would allow Paulson to participate in selecting a portfolio of
reference obligations and then effectively short the RMBS portfolio it
helped select by entering into CDS with GS&Co to buy protection on
specific layers of the synthetic CDO's capital structure.
A Paulson employee explained the investment opportunity as of
January 2007 as follows:
"It is true that the market is not pricing the subprime RMBS
wipeout scenario. In my opinion this situation is due to the fact that
rating agencies, CDO managers and underwriters have all the incentives
to keep the game going, while 'real money' investors have neither the
analytical tools nor the institutional framework to take action before
the losses that one could anticipate based [on] the news available
everywhere are actually realized."
"Portions of an e-mail in French and English sent by Tourre to a
friend on January 23, 2007 stated, in English translation where
applicable: "More and more leverage in the system, The whole building is
about to collapse anytime now ... . Only potential survivor, the
fabulous Fab[rice Tourre] "standing in the middle of all these complex,
highly leveraged, exotic trades he created without necessarily
understanding all of the implications of those monstrosities!!!"
Similarly, an e-mail on February 11, 2007 to Tourre from the head
of the GS&Co structured product correlation trading desk stated in part,
"the cdo biz is dead we dont have a lot of time left."
INTRODUCTION OF ACA TO THE PROPOSED TRANSACTION
GS&Co also knew that at least one significant potential investor,
IKB Deutsche Industriebank AG ('IKB'), was unlikely to invest in the
liabilities of a CDO that did not utilize a collateral manager to
analyze and select the reference portfolio.
21. GS&Co therefore sought a collateral manager to play a role in
the transaction proposed by Paulson. Contemporaneous internal
correspondence reflects that GS&Co recognized that not every collateral
manager would "agree to the type of names [of RMBS] Paulson want[s] to
use" and put its "name at riskon a weak quality portfolio."
---
13. Internal GS&Co communications emphasized the advantages from a
marketing perspective of having ACA associated with the transaction. For
example, an internal email from Tourre dated February 7, 2007, stated:
"One thing that we need to make sure ACA understands is that we want
their name on this transaction. This is a transaction for which they are
acting as portfolio selection agent, this will be important that we can
use ACAs branding to help distribute the bonds."
PAULSONS PARTICIPATION IN THE COLLATERAL SELECTION PROCESS
32. On February 2, 2007, Paulson, Tourre and ACA met at ACA's
offices in New York City to discuss the reference portfolio.
During the meeting, Tourre sent an email to another GS&Co employee
stating, "I am at this aca paulson meeting, this is surreal."
---
61. ACA's parent company, ACA Capital Holdings, Inc. ("ACA
Capital"), provided financial guaranty insurance on a variety of
structured finance products including RMBS CDOs, through its
wholly-owned subsidiary, ACA Financial Guaranty Corporation.
62. ACA Capital was unaware of Paulson's short position in the
transaction. It is unlikely that ACA Capital would have written
protection on the super senior tranche if it had known that Paulson,
which played an influential role in selecting the reference portfolio,
had taken a significant short position instead of a long equity stake in
ABACUS 2007-AC1.
(end of SEC excerpts)
** Market News International Washington Bureau: 202-371-2121 **
[TOPICS: M$U$$$,M$$CR$,MNUEQ$,MGU$$$]
Whether other banks are likely to be charged in similar lawsuits "depends on what we find as a result of our investigation," Khuzami said in a question and answer session during a conference call.
"If we find structures or deals or arrangements that share similar profiles to this one, as well as other structures and transactions violating securities laws, we will pursue them aggressively," he added.
Earlier Friday, the agency announced that it had filed a complaint against Goldman Sachs in relation to a synthetic CDO deal made in April
US SEC: To'Aggressively' Probe'Spectrum'of Struct Prods/Deals 13:47 EDT /
Apr 16
By Yali N'Diaye
WASHINGTON (MNI) - The Securities and Exchange Commission Friday
said it continues to "aggressively" investigate complex structured deals
of the type that led the agency to charge Goldman Sachs.
"We continue to examine structured products and other instruments
that contributed to the financial crisis," Director of Enforcement
Robert Khuzami told reporters shortly after the agency announced charges
against Goldman Sachs for fraud in structuring and marketing
collaterized debt obligations tied to subprime mortgages.
Whether other banks are likely to be charged in similar lawsuits
"depends on what we find as a result of our investigation," Khuzami said
in a question and answer session during a conference call.
"If we find structures or deals or arrangements that share similar
profiles to this one, as well as other structures and transactions
violating securities laws, we will pursue them aggressively," he added.
Earlier Friday, the agency announced that it had filed a complaint
against Goldman Sachs in relation to a synthetic CDO deal made in April
2007.
The synthetic CDO -- marketed under the name of ABACUS 2007-AC1 --
was backed by a portfolio referencing residential mortgage-backed
securities, at a time the housing market was already showing signs of
distress.
"The SEC alleges that undisclosed in the marketing materials and
unbeknownst to investors, the 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 agency said earlier in a
statement.
As a result, "The Commission seeks injunctive relief, disgorgement
of profits, prejudgment interest, and financial penalties."
However, while Paulson & Co clearly benefited from the deal --
which yielded the hedge fund about $1 billion, about the same amount
investors lost -- and was actively involved in structuring the
portfolio, the hedge fund was not responsible for misrepresentation
to investors, Khuzami said.
As a result, the Paulson firm was not charged. "We charge those
that we feel appropriate based on the evidence and the law," Khuzami
said. He added, "In this case it was Goldman that made a representation
to investors. Paulson did not." In fact, Paulson & Co.'s attempts to
attract investors for what then appeared to many to be an ill-conceived
bet against the mortgage market has been described in great detail in
two books, one of them published almost a year ago.
"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 SEC said.
"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," it added.
Goldman Sachs earned $15 million in brokerage fees from Paulson,
which went to the broker "with a desire to short through CDS, a select
group of these triple-A securities," Khuzami said.
Not only did Goldman Sachs not disclose this key information in its
marketing material, but the firm told ACA Management LLC (ACA), which
selected the marketing material, that Paulson was taking a long position
in the transaction, when in fact the hedge fund took a short position.
The complaint identifies European banks -- German bank IKB Deutsche
Industriebank AG ('IKB') and ABN Amro -- as a long side investors.
Six months after the deal closed three years ago, 83% of the MBS in
the CDO had been downgraded with 17% under negative watch. Three months
later, it's 99% that had been downgraded.
Goldman Sachs was, however, well aware of such an outcome,
documents of the complaint released by the SEC show.
Already in January 2007, months before the deal