Finance

The Goldman Sachs Case: Who Knew What, When?

There's this key question in the Goldman case that we've been hashing out on the blog and the podcast: Did Goldman lead ACA Management to believe that Paulson & Co. was going to be a long investor in Abacus, the CDO at the center of the deal?

Paulson, in fact, was a short investor in Abacus. The SEC says Goldman misled ACA about this; Goldman denies it.

Testimony that came to light yesterday suggests ACA may have known Paulson was going to be a short investor, not a long. That's good for Goldman.

CNBC reported that a guy named Paolo Pellegrini, who worked for Paulson, met with a woman from ACA named Laura Schwartz. Here's CNBC on what Pellegrini told SEC investigators about that meeting:

In one part of Pellegrini's testimony, a government official asked him: "Did you tell (Schwartz) that you were interested in taking a short position in Abacus?"

"Yes, that was the purpose of the meeting," Pellegrini responded.

"How did you explain that to her?" the government official said.

"That we wanted to buy protection on traunches of a synthetic RMBS portfolio." Pellegrini said.

More on the Goldman case:

  • The WSJ looks at some of the actual homes — with actual people — that were the basis of the bets in the CDO.
  • Goldman's CEO Lloyd Blankfein told a client that the case would "hurt America," the FT reports.
  • Blankfein, along with a couple other Goldman execs and Fabrice Tourre, the Goldman VP at the center of the SEC case, will testify next week before a Senate committee, Bloomberg reports.
  • Steve Randy Waldman at Interfluidity challenges Goldman's argument about longs and shorts in synthetic CDOs.

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