In case you weren’t focused on the Goldman-Abacus-housing collapse timeline, here are some fun facts, courtesy of Steven Davidoff and Peter Henning at DealBook and the SEC’s fraud allegations:Early December 2006: After making money hand over fist for years betting on the housing bubble, Goldman Sachs suddenly starts losing money on its mortgage trades. For 10 straight days in early December, 2006, the firm’s mortgage desk loses money. Alarm bells go off.
December 14, 2006: Goldman’s CFO David Viniar and other executives decide to stop losing money. Goldman repositions its portfolio and begins to go short the housing market.
Early January, 2007: Goldman client Paulson & Co. asks Goldman to construct a CDO that allows Paulson to go short the housing market, too (subprime mortgages, anyway). Goldman VP Fabrice Tourre begins assembling the transaction.
January 23, 2007: Goldman employee Tourre, a VP on the “structured product correlation trading desk”, expresses his view in an email that the housing-related CDO market is about to collapse: “More and more leverage in the system, The whole building is about to collapse anytime now…. Only potential survivor, the fabulous Fab[rice Tourre]…standing in the middle of all these complex, highly leveraged trades he created…”
February 7, 2007: Goldman’s Tourre emphasises the need to have a firm named ACA’s “name” on the the Paulson-short vehicle, which will be called Abacus–otherwise no one will buy it.
February 11, 2007: Fabrice Tourre’s boss on the structured product trading desk tells him to hurry up because the market is beginning to collapse and time is running out: “the cdo biz is dead and we don’t have a lot of time left.”
February 26: After six weeks of negotiation, Abacus, Paulson, and Goldman agree on a portfolio of securities to be included in Abacus.
March 12: Goldman begins marketing Abacus.
April 26, 2007: The Abacus deal closes. The market is collapsing, so Goldman has been unable to unload all of Abacus. (Good thing they’ve also bet billions on the market collapsing, or they might have lost money).
By January, 2008: 99% of the securities in Abacus have been downgraded and the CDO has lost $1 billion. Goldman and its client Paulson & Co. have cashed in. Fabrice Tourre gets a $2 million bonus.
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