Thursday, June 10, 2010

More bad times for Goldman

The Financial Crisis Inquiry Commission (FCIC) had to subpoena Goldman’s documents after making many requests over many months. The FCIC is investigating the cause of the financial crisis. Then Goldman gets sued by Australian Hedge Fund Basis Yield Alpha Fund (BYAF), for securities fraud. The claim alleges that Goldman aggressively sold the Timberwolf collateralised debt obligation while shorting the market. The claim alleges that Goldman marketed Timberwolf as having assets selected by Greywolf Capital Management, when in reality Goldman traders had the final word on TImberwolf. Timberwolf became well-known during the Senate Permanent Subcommittee hearings this past Spring.

Basically Goldman marketed assets to clients that Goldman itself was shorting. This is all very similar to the analyst suits around 2003 that found that analysts were recommending stocks to clients while the firm itself was bearish on the stocks.

A lot of the reports on this lawsuit seem to think that the hedge fund should stop crying over spilt milk- which is probably true. This could all just be Goldman scape goating. Also, why are these suits so few and far between? Why aren’t all the hedge funds suing Goldman or suing other institutions?

I don’t know the answers. Right now I think it all actually might be too complex and complicated for me to understand.

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