US charges Goldman Sachs with fraud
The Securities and Exchange Commission has charged investment banking titan Goldman Sachs with civil fraud over a pre-packaged mortgage instrument they say was designed to fail.Goldman Sachs created the derivative -- called Abacus 2007-AC1 -- in response to a request from a hedge fund manager who predicted that the housing market would collapse and wanted to bet against it. The trader, John Paulson, later earned $3.7 billion for his wager.
According to the New York Times, which first revealed details of the Abacus case, the instrument was among 25 Goldman created so that clients could bet against the housing market
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I think it's important for people to realize how big a deal derivatives are. Here's a good article.
The One Market the Fed Hopes You Won't Find Out About
Update: SEC says Goldman defrauded investors of $1 billion
Comments from fUny1:
There is one pertinent question that must be asked not only of the SEC but of Goldman Sachs?
Why today? Why on an options expiration day?
Is the SEC in collusion why Goldman Sachs? It is beyond suspicion that this happened on an options expiration day. Had this occurred next Monday it would have been suspicious also.
Did the SEC staff not know that today was expiration day? Hardly!
Someone must have known about these proceedings and guess #1 is Goldman Sachs.
Who's going to investigate Goldman's traders and their purchasing of puts on their own securities to bet against themselves in effect and win big.
If a gambler( aka Government Sachs Casino Services, Inc) had put down 1 grand on their $170 April put options in the morning when they were trading for pennies, by high noon that 1k bet(plus 1k commissions) would be worth at least a cool million if not 1.45 million.
Does the SEC care to find out who else was betting on Goldman to fall this much on options expiration day?
This would be a loop feedback type of investigation where the SEC would be investigating its own leaks on this case.
A slap of the hand indictment was bound to happen, but there's a reason why you don't indict on options expiration days, unless you have the need to make 110,000 % on your money in one day.
That means you Ben's Bernanke's Brigade of bribed primary dealers. Who's going to investigate you?