Monday, April 19, 2010

Another Comment On Goldman Vs SEC

Another comment I wrote to a Wall Street Journal article, "The SEC vs. Goldman: More a case of hindsight bias than financial villainy."
Goldman could have structured the whole deal and allowed Paulson to both own the equity position and short at the same time. Paulson would only have had to increase his short position to offset the addition of the equity portion. The fact that that there is no need to go through a charade of Paulson taking equity when he could have taken a real equity position to perpetrate the fraud, shows that no one was trying to perpetrate a fraud on the investors.

The WSJ opinion piece is correct that this appears to be nothing but a political play by Obama to get his financial reform passed.

The fact that the SEC asked Goldman in 2008 for info on this deal does not clear the SEC of politics. The SEC often asks Wall St firms for additional info about deals and securities. The SEC went to its file and found this older info inquiry about CDOs to make it appear non-political.

Emails from employees that the sky is falling are also irrelevant. Who has not worked in a company and heard the employees say the firm does not know what it is doing, or that it is ripping off customers, or if the customers only knew. It is normal office talk among cohorts, who think they know more than their bosses and everyone else. Many times the employees are just reflecting their own job frustrations.

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