Posts Tagged ‘dogs playing poker’

SEC: Goldman Cheated

April 16, 2010

SEC: Goldman Cheated

The Securities and Exchange Commission (SEC) charged Goldman Sachs with defrauding investors with a collateralized debt obligation (CDO) based on subprime mortgages. Goldman failed to disclose that it structured these unregulated instruments in partnership with a hedge fund that was also shorting these securities — betting against them. The CDOs failed to the tune of $1 billion, and investors and bond insurer MBIA were stuck holding the bag. Goldman made $15 million on the deal; the hedge fund made $1 billion when the CDOs went bad.

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Shadow Banking System

March 5, 2010

Shadow Banking System

Dogs Dealing Unregulated Securities, after C.M. Coolidge (Mike Licht).

The financial crisis wasn’t caused by mortgages — or mortgage-backed securities, Fannie Mae, or space aliens. It wasn’t trading in CDOs (Collateralized Debt Obligations) but the market in REPOs (repurchase agreements ) which produced a plain old panic in the new-fangled nonbank shadow financial sector. Old fashioned investment banks had morphed into broker-dealer banks and could not survive a “run on the bank” any more than conventional banks.

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