Goldman Fraud Suit Is a Big Deal

Michael Johnston submits:After generally impressive earnings reports sent markets higher for much of the last week, Friday’s shocking allegations against Goldman Sachs (GS) ensured that the week ended on a down note.

John Lounsbury submits:On Friday the SEC made public civil charges of fraud against Goldman Sachs (GS) and 31 year old Vice President Fabrice Touree with regard to specific mortgage securities transactions.

Marvin Clark submits: My favorite hotel in Las Vegas is Steven Wynn’s Wynn Las Vegas and Encore. His Encore Macau opened on April 22. As revenue from Asia becomes a larger portion of Wynn Resorts Holdings, moving the headquarters from Las Vegas is being considered. If every American CEO demanded the responsibility for his or her company as does Mr. Wynn, American business would, instead of fearing the future of global completion, instead be relishing the sweet smell of opportunity.

Avery Goodman submits: The SEC’s recent charges against Goldman Sachs (GS) involve something known as a collateralized debt obligation (heretofore referred to as “CDO”), which is a derivative instrument whose value is determined (or "derived") from the value of something else. Most CDOs are essentially investment funds, and their investments are generally chosen by their promotors and creators.

The Goldman Sachs fraud charges certainly make the company look sleazy, but one key fact seems not to be discussed too much:  the securities involved were synthetic CDOs, and I think that makes a big difference.  The plan for this article is1.    Explain what a CDO is2.    Explain what is different about a synthetic CDO3.    Explain how that matters for the fraud allegationWhat is a CDO?

Goldman Sachs Group bond trader Fabrice Tourre lost his bid to dismiss a civil securities-fraud lawsuit by the SEC over the marketing and sale of a complex financial instrument tied to subprime mortgages.

Goldman Sachs Group bond trader Fabrice Tourre lost his bid to dismiss a civil securities-fraud lawsuit by the SEC over the marketing and sale of a complex financial instrument tied to subprime mortgages.