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“Goldman Sachs did not have access to any special information that caused us to know that the U.S. housing market would collapse,” the firm stated in an “executive summary” of its arguments released April 24.
Originally posted by woodwardjnr
It's good to see that people are now realising the financial collapse was not some, huge mistake or act of God, but a calculated fraud. Will those behind it be brought to justice? And, what sort of punishment should they expect?
Here’s what allegedly occured. Goldman sold a “synthetic CDO,” or collateralized debt obligation, to investors. Goldman allegedly told those investors that subprime-mortgage securities underlying the CDO were selected by a third-party firm called ACA.
However, the SEC alleged, it was the Paulson fund that had selected the securities. Paulson in a separate transaction then put up lots of money to bet that those securities would sour.
Investors who purchased slices of the CDO, such as IKB, a German bank, collectively lost $1 billion as the mortgage-backed securities quickly soured amid the mortgage crisis, according to the SEC.
Goldman allegedly helped Paulson bet against those securities, and Paulson’s firm made a profit of about $1 billion.