Posted on 04/19/2010 7:46:39 PM PDT by NormsRevenge
In 2004, Paolo Pellegrini was out of a job, living in a one-bedroom apartment in Westchester County, N.Y., with little money in the bank. He soon managed to land a gig working for hedge-fund manager John Paulson.
Today, after helping Paulson & Co. score $20 billion with a bet against housing and pocketing about $175 million for himself, Mr. Pellegrini is an unnamed but key character in the government's lawsuit against Goldman Sachs Group Inc. (NYSE: GS), according to people familiar with the matter.
The government alleges the bank deceived investors by selling them mortgage securities that the hedge fund had a hand in creating without disclosing the hedge fund's role in the deal or its bearish view on it. Mr. Pellegrini was Mr. Paulson's key representative on the deal, ..
Goldman denies it did anything wrong and is fighting the civil lawsuit filed Friday by the Securities and Exchange Commission in a New York federal court. Neither the hedge fund nor Mr. Pellegrini has been accused of wrongdoing.
The following account about Mr. Pellegrini is based on interviews with people familiar with him and his role at Paulson & Co. and the government's complaint.
Mr. Pellegrini, a stylish native of Italy, began his mostly disappointing Wall Street career in the mid-1980s. He had been a midlevel investment banker at Lazard Freres and tried a few other trading ventures. Two high-profile marriages—to Claire Goodman, daughter of legendary New York State senator Roy Goodman, and to Beth Rubin DeWoody, daughter of the late New York real-estate mogul Lewis Rudin—ended in divorce.
Then Mr. Paulson, an acquaintance, granted Mr. Pellegrini an interview in 2004. Some at the firm were reluctant to bring on Mr. Pellegrini, who lacked experience in some areas the hedge-fund did work in. Mr. Paulson hired him anyway ..
(Excerpt) Read more at finance.yahoo.com ...
BFL
What is the relationship, if any, between Paulson and Cohen?
I had a neighbor and some customers who were in the mortgage broker business. And the 20-something daughter of one of my coworkers. You could hardly believe the amounts of money that they were dealing in, it was like watching drug rings in operation. I used to pump them for information on how the operation worked since outsized returns don’t make economic sense and don’t last long. It took me quite some time to get a handle on how the money was moving around.
I was convinced that it would all fall apart but it lasted a whole lot longer than I thought it would. And while I thought the wreckage would be big I have to admit that it has been even more impressive than I imagined. When I heard that the derivatives had values of over a trillion I should have realized that this was going to be 9 plus on the Richter scale.
Data on the five-fold growth of derivatives to $516 trillion in five years comes from the most recent survey by the Bank of International Settlements, the world's clearinghouse for central banks in Basel, Switzerland.
While that is one of the reasons, loans to people with bad or no credit had been around for decades. That was just used as one of the weapons.
What really caused this disaster what mainly deregulation acts like repealing glass-steagall and Phil Gramms idiotic “Commodity Futures Modernization Act of 2000” which greenlighted all these companies to leverage themselves to the hilt and made it actually illegal to regulate credit default swaps. Thus the big players developed a thirsting for more mortgages to package as investments, even subprime garbage, like a vampires thirst fresh blood. And with all those deregulation moves, they could keep a lot of it “off-books” to hide the real carnage going on.
I count those events as the defining moments that set this disaster truely in motion.
It was a demand pull situation. Wall Street made its insatiable demand for mortgages well known. So the mortgage brokers gave any warm body a mortgage. There was and is no punishment for making idiotic mortgages and selling them to Wall St/Banksters to bundle up.
From what I can tell the independent mortgage brokers (most who are gone now) were doing this a lot more than banks. I have a feeling that lots of bribes and kickbacks were paid to these brokers to send newly minted mortgages to Lehman (for example) instead of a rival. There was fierce competition on Wall Street to assemble and sell mortgage backed securities
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