Manhattan Institute for Policy Research.
search  
 
Subscribe   Subscribe   MI on Facebook Find us on Twitter Find us on Instagram      
 
 
   
 
     
 

RealClearMarkets

 

The Goldman Deal: Adults Living Dangerously

April 21, 2010

By Steven Malanga

There’s an old cliché about investing which holds that every transaction, even the sale of a single share of stock on a regulated exchange, has a winner and a loser. When you buy that share you’re obviously betting it will rise, and whoever sold it is figuring that it will fall.

Most small-time investors don’t see the market in such starkly zero-sum terms. But sophisticated players surely understand that is what much of investing is about, especially with complicated products like credit default swaps that explicitly let you place bets for or against a market.

It’s difficult to know at this point whether Goldman Sachs was a winner or a loser in the now infamous Abacus 2007-AC1 collateralized debt obligation that is at the heart of Securities and Exchange Commission accusations of fraud by the investment bank. The SEC claims that Goldman didn’t tell two big investment players who bet on the upside of the housing market through Abacus that hedge-fund operator John Paulson, who was shorting the market, had a hand in selecting the portfolio for the deal.

There’s an old cliché about investing which holds that every transaction, even the sale of a single share of stock on a regulated exchange, has a winner and a loser. When you buy that share you’re obviously betting it will rise, and whoever sold it is figuring that it will fall.

Most small-time investors don’t see the market in such starkly zero-sum terms. But sophisticated players surely understand that is what much of investing is about, especially with complicated products like credit default swaps that explicitly let you place bets for or against a market.

It’s difficult to know at this point whether Goldman Sachs was a winner or a loser in the now infamous Abacus 2007-AC1 collateralized debt obligation that is at the heart of Securities and Exchange Commission accusations of fraud by the investment bank. The SEC claims that Goldman didn’t tell two big investment players who bet on the upside of the housing market through Abacus that hedge-fund operator John Paulson, who was shorting the market, had a hand in selecting the portfolio for the deal.

Original Source: http://www.realclearmarkets.com/articles/2010/04/21/the_goldman_deal_adults_living_dangerously_98429.html

 

 
PRINTER FRIENDLY
 
LATEST FROM OUR SCHOLARS

5 Reasons Janet Yellen Shouldnt Focus On Income Inequality
Diana Furchtgott-Roth, 10-20-14

Why The Comptroller Race Matters
Nicole Gelinas, 10-20-14

Obama Should Have Picked Ebola Czar With Public-Health Experience
Paul Howard, 10-18-14

Success Of Parent Trigger Is UnclearJust As Foes Want
Ben Boychuk, 10-18-14

On Obamacare's Second Birthday, Whither The HSA?
Paul Howard, 10-16-14

You Can Repeal Obamacare And Keep Kentucky's Insurance Exchange
Avik Roy, 10-15-14

Are Private Exchanges The Future Of Health Insurance?
Yevgeniy Feyman, 10-15-14

This Nobel Prize-Worthy Economist Figured Out How To Destroy Terrorism
Diana Furchtgott-Roth, 10-15-14

 
 
 

The Manhattan Institute, a 501(c)(3), is a think tank whose mission is to develop and disseminate new ideas
that foster greater economic choice and individual responsibility.

Copyright © 2014 Manhattan Institute for Policy Research, Inc. All rights reserved.

52 Vanderbilt Avenue, New York, N.Y. 10017
phone (212) 599-7000 / fax (212) 599-3494