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Thursday, August 6, 2009

Goldman Sachs May Have to Explain Why They Bought CDS When They Were Shorting the Mortgage Market

*hummm...let's see...
GS tells shareholders (and media pundits claiming to be analysts) that we did not participate in subprime and we started hedging when things started to go when Bear Stearns' 2 hedge funds blew up in June of 2007. But GS bought CDS from AIG to the tune of around $2B. So if you knew subprime was BAD and you were already hedging by shorting mortgage bonds, why did you buy insurance on those CDO's from a company you KNEW wouldn't be able to pay when it all went bust when you KNEW it was going to bust? Was it because you had a friend at Treasury (Paulson) and the NY Fed (Geithner) who would bail you out if it all came crashing down? WINNER WINNER WINNER Wish I had friends....

Goldman Sachs Is Cooperating With Inquiries on Swaps
Aug. 5 (Bloomberg) -- Goldman Sachs Group Inc., the most profitable trader of fixed-income securities in the U.S., said it’s cooperating with government inquiries relating to the credit-default swaps market.

The company and some affiliates “have received inquiries from various governmental agencies and self-regulatory organizations regarding credit-derivative instruments,” New York-based Goldman Sachs said in a quarterly regulatory filing with the U.S. Securities and Exchange Commission today. “The firm is cooperating with the requests.”

Goldman Sachs, which made more than $100 million in trading revenue on a record 46 separate days in the second quarter, didn’t provide further information on the nature of the inquiries. The bank is also cooperating with inquiries on compensation, the filing showed, without providing details.

The U.S. Justice Department last month confirmed it was investigating the $27 trillion market for trading credit default swaps. The Department is trying to determine whether the banks that own Markit Group Ltd., a London-based data provider, received advantages as owners and providers of prices and trading patterns for the contracts, according to two people familiar with the matter.

Goldman Sachs is one of the shareholders in Markit, along with New York-based JPMorgan Chase & Co., Bank of America Corp. of Charlotte, North Carolina, and Edinburgh’s Royal Bank of Scotland Group Plc, filings show. Goldman Sachs reported record second-quarter earnings led by trading revenue that reached an all-time high.

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