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Posts Tagged ‘Stearns’

Goldman correspondence in the press today regarding its CDO investments extend beyond Abacus to Timberwolf I, a related investment that may have been funded with proceeds from Abacus.  According to Marketwatch, $300 million of Timberwolf CDOs were sold to Bear Stearns within one year of its collapse.

The intriguing subtext to most of the suppositions on the part of the media is that Goldman had 100% certainty that its positions were going to earn outsized returns. There is no question that risk was involved and that its bets, with a different set of circumstances, could have led it to a similar fate to Bear Stearns.  The media mythologizing of Goldman’s prowess is not an accurate representation of the facts.  Yes, Goldman may have been incrementally smarter than Bear, Merrill, Citi, etc., but there is no question that it was luckier.

While Timberwolf turned out to be a bad deal for its buyers, the comments currently being circulated from those on the Goldman side of the deal are not evident of wrongdoing.  Goldman could have been wrong about it being a bad deal for the buyer. The media appears to forget this, again contributing to the myth of Goldman outflanking the mortgage meltdown on its wits alone.

Back to material information: if Goldman withheld material information from the buyers of Timberwolf, this is serious wrongdoing.  If they truly knew that it was a bad (or misrepresented) investment, the gloves should come off at the SEC.  This investment was a wolf in wolf’s clothing, but they weren’t telling.

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