 The Wild Wild World of Wealth |
Yesterday, Goldman Sachs settled fraud charges associated with Abacus CDOs for $550 million. Not surprisingly, the settlement excluded Fabrice P. Tourre, who will no doubt be hung out to dry as the Tourre de Toxic winds to a close.
Personally, I think the government just got pimp-slapped. Here are five reasons why:
The news is out. US prosecutors are investigating several Morgan Stanley CDOs. Like the Abacus inquiry at Goldman Sachs, the issue is what representations Morgan Stanley made to clients. How did the bank market those Weapons of Money Destruction? Here’s what The Wall Street Journal reports:
Among the deals that have been scrutinized are two named after U.S. Presidents James Buchanan and Andrew Jackson, a person familiar with the matter said. Morgan Stanley helped design the deals and bet against them but didn’t market them to clients. Traders called them the “Dead Presidents” deals.
So without further ado, I’d like to play a little song for my friends from Morgan Stanley. I give you Little Walter and Dead Presidents:
Earlier this week, I described the Magnetar Trade—the idea that a hedge fund can promote a CDO and bet against the same pool of assets. I have no idea whether the SEC’s charges involve Magnetar, but one thing is clear even now.
Other law suits will follow.
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