One more interesting tidbit to come out of Goldman’s Abacus deal:
In contrast to what the firm just said in its Annual Report, Goldman DOES bet against its clients.
How do we know that?
In the Abacus deal, Paulson & Co. was a Goldman client. Paulson went short the Abacus CDO (or the bonds within it).
In its defence against the fraud charges the SEC just clobbered it with, Goldman pointed out that it had lost $90 million on the collapse of the Abacus CDO because it had retained a “substantial long position” in the transaction.
So that means…
Goldman was betting against Paulson & Co.
(Goldman’s defence against that particular charge might be that it only retained a $90 million long position in the CDO because it couldn’t find anyone stupid enough to buy it. But given that the SEC basically just accused Goldman of selling a crappy security designed to self-destruct, we don’t imagine Goldman will be making that defence publicly right now.)
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