SEC Rule Would Ban Banks and Hedge Funds From Betting on Investor Losses

SEC Rule Would Ban Banks and Hedge Funds From Betting on Investor Losses

By Monday, September 19, 2011



In the lead-up to the 2008 sub-prime mortgage crisis, banks like Goldman Sachs bet against their clients with collateralized debt obligations and were rewarded handsomely. A new Securities and Exchange Commission (SEC) proposal would make this illegal.




In 2007, as the sub-prime mortage crisis was looming, Goldman Sachs and hedge funder manager John Paulson teamed up to bundle 3,000,000 sub-prime mortgage loans together into a collateralized debt obligation called ABACUS 2007-AC1, and then shorted mortgages to unwitting investors. John Paulson made $1 billion (Goldman took a $15 million cut) and investors lost $1 billion.

According to The New York Times, 25 such investment vehicles were created by Goldman Sachs in order to shield the firm from massive losses in mortgages. However, they turned out to be rather great investments instead of losses. (Deutsche Bank and Morgan Stanley also created these CDOs).

At issue in the SEC complaint was whether the firms who selected the mortgages intentionally chose those most likely to fail and shine the shit for their investors.





Views: 250


You need to be a member of 12160 Social Network to add comments!

Join 12160 Social Network


  • Add Photos
  • View All



Please remember this website is supported by your donations...


  • Add Videos
  • View All

© 2018   Created by truth.   Powered by

Badges  |  Report an Issue  |  Terms of Service

content and site copyright 2007-2015 - all rights reserved. unless otherwise noted