Once again - Was the economic collapse a conspiracy?

[Me]

That is done all the time on the street. People who want to create a security to short, go to an investment banker and ask the banker to find someone willing to take on the other side. If all risk was disclosed to the sophisticated investor and they had ALL documentation on the loan, then it is up to their credit analysis team to decide whether or not they are investing in garbage or not. They simply failed at doing proper due dilligence. The whole setup is not the most comfortable thing around town, but their is nothing illegal. Telling them that Paulson picked some of the securities and wants to short them doesn't change the bad due diligence that the buyer did. If the security is good, you buy it regardless of what Paulson is doing. If is bad, you say no you do not want the risk. Incompetence by the company based on the astories I seeing so far.

[Gamma]

not the exact same analysis but a similar conclusion. mine is more succinct, if the government has amanged to put a skip on the recession and turned the economy around...yes, november will be very itneresting!

[Me]

No one to blame but themself.

http://finance.yahoo.com/news/Main-I...&asset=&ccode=


Main Investor in Goldman Deal May Have Caused Losses
ACA Management, the main investor in a failed mortgage-securities deal that prompted securities fraud charges against Goldman Sachs, appears to have caused at least some of the $1 billion loss itself, CNBC has learned.



ACA, which selected the mortgage portolio along with hedge fund Paulson & Co, suggested securities that ended up lowering the quality of the deal. While ACA apparently thought the securities would improve the portfolio, experts contacted by CNBC say it had the opposite effect.

The revelation is a further blow to the Securities and Exchange Commission's civil fraud suit against Goldman. The agency contends Goldman didn't tell investors in the mortgage portfolio-including ACA-that Paulson was not only picking some of the securities but betting against-or shorting-them.

But as CNBC reported Wednesday, a top Paulson lieutenant testified that he told ACA what the hedge fund's position would be ahead of time. (Click here for story.) It also has emerged that ACA-not Paulson-had final say in what securities were included.

ACA actually threw out 68 of the 123 securities suggested by Paulson. Those 68 securities had higher delinquency rates than the remaining ones, according to documents reviewed by CNBC. However, those documents show that ACA added 14 securities with lower credit ratings than the overall portfolio.

Documents also show that ACA added other securities with a higher percentage of mortgages from California and interest-only loans-two favorites of the shorts because they were perceived as having a higher chance of failure.

The apparent reason for adding these securities was that they had lower delinquency percentages overall. But they also has the very characteristics that Paulson and other shorts at the time believed would lead to higher delinquencies in the future.



CNBC asked one investor who was short mortgages during this time how he would have responded to the securities suggested by ACA. His responses: "I'd say, 'Thank you, sir. May I have another?' "

ACA's actions appear to reflect the conventional thinking of that time that, in fact, failed to understand the downward direction of the subprime mortgage market or its warning signals of trouble ahead.

Paulson and those who shorted the deal did. In testimony to the government, former Paulson hedge-fund manager Paolo Pellegrini told SEC attorneys: "Our view became the norm, and we made all the money."

ACA collapsed shortly after taking nearly 85 percent of the risk in the Goldman portfolio.

[Karl]

not the exact same analysis but a similar conclusion. mine is more succinct, if the government has amanged to put a skip on the recession and turned the economy around...yes, november will be very itneresting!

btw - Yuh like how it is playing out?!

President Obama just gave it to the Republicans on the chin this morning! First punch...mi seh!