The product was new and complex, but the deception and conflicts are old and simple. Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.

Robert Khuzami, the director of the S.E.C.’s division of enforcement: via NYT. What similarities or dissimilarities are there with the circumstances around the Magnetar CDO trade?

The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation.

GS, response, an hour later

Wall Street reaped huge profits from “creating filet mignon AAAs out of BB manure.

Mike Blum, GS CMBS surveillance expert: via Dunlop

More and more leverage in the system, the whole building is about to collapse anytime now…Only potential survivor, the Fabulous Fab[rice Tourre]…standing in the middle of all these complex, highly leveraged, exotic trades we created without necessarily understanding all of the implications of those monstruosities!!!

Fabrice Tourre, VP, Goldman Sachs, January 23, 2007. He would soon receive an email from the head of GS&Co’s structured product correlation desk, “the cdo biz is dead we don’t have a lot of time left.” (February 11, 2007)

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