Skip to comments.Goldman Denies It Bet Against Clients
Posted on 04/08/2010 4:37:45 AM PDT by TigerLikesRooster
Wednesday, April 7, 2010
Goldman Denies It Bet Against Clients
Goldman has just issued an eight page letter to shareholders, in which it tries to defend itself against its critics, particularly regarding its conduct vis-a-vis AIG, with how it got short the residential mortgage market, and its compensation.
To be more terse than usual: the AIG argument is generally plausible (and not inconsistent with what Tom Adams analysis has found), the other two are problematic. to put it politely.
Goldman has been charged with overly aggressive marks on its AIG related exposures, which have included allegations of nefarious intent. There have long been problems with this theory. The big one is that there was and still is a greaat deal of denial among banks as to how far mortgage-related paper needed to be marked down. Tom Adams looked at the marks that Goldman asked, based on news reports and other sources, and found their marks to be realistic. Moreover, the CDOs in question were not owned by Goldman (it has been clear for some time that at least some of the AIG-related CDOs were client position; the letter indicates they all were). That means that Goldman was a swap intermediary; it had sold CDS protection to clients, then turned around and laid that risk of on AIG.
There is one part of Goldmans argument that is tripe, however:
Over the ensuing weeks and months, we continued to make collateral calls, which were based on market values, consistent with our agreements with AIG. While we collected collateral, there still remained gaps between what we received and what we believed we were owed.
(Excerpt) Read more at nakedcapitalism.com ...
I’ll bet a dollar that they are shorting the EURO at this moment based on their clients (Greece) financial situation. That would be betting against a client.
Great defense - they were just the bookie.
TIGER....time for a pot of hot tar, bag of feathers ....