Reuters, 23 April 2010
I know you’ve been waiting for this one — here you go! Enjoy all 196 pages of it, and let me know what you find: Matthew Goldstein has already found a Goldman conflict of interest on page 71 (page 77 of the PDF) — the “Initial Collateral Security that is a CLO Security” turns out to be another Goldman product. Which is not obvious from the prospectus at all, since it isn’t even named.
“The Protection Buyer or its affiliates and/or the Portfolio Selection Agent or its affiliates may have information, including material, non-public information, regarding the Reference Obligations and the Reference Entities.”
Looks like a lot of subprime shorts knew exactly what these servicers were up to. In terms of CDS payouts, default is a default…doesn’t matter how you come by it. Was this reference collateral selected on the basis of complicit servicers’ expertise in fabricating defaults?
If these reference obligations were selected and shorted with knowledge of subsidiary servicer complicity, this will turn out to be the largest insider trading scheme the world has ever seen.
Phi Beta Iota: Emphasis added. “But enough eyeballs on it, no crime is invisible.” We are entering an era where Goldman Sachs and others are going to be subject to both enormous amounts of individual public scrutiny, and scorched earth legal campaigns by governments as well as Main Street corporations to extract compensation from Goldman Sachs and others for their many deliberate crimes that some call financial terrorism.