Tuesday, 21 October 2014
Last updated 2 hours ago
Jan 14 2013 | 2:07am ET
The insurer suing Paulson & Co. and Goldman Sachs over a collateralized debt obligation knew perfectly well that the hedge fund was shorting it, the bank said.
In a court filing on Friday, Goldman said that ACA was aware that Paulson was shorting residential mortgage-backed securities at the time of the 2007 CDO, Abacus-2007-AC1. The bank added that ACA Financial Guaranty, the insurer, “cherry-picked” the evidence it offered in its lawsuit.
Among the evidence left out was a May 2007 phone call between a Morgan Stanley bond trader and an ACA executive.
“These guys, the hedge fund, they are—they’re shorting this stuff right now, huh?” the executive, a vice president, asked.
“Yup… They’re shorting this stuff right now,” the trader said.
Later, the trader told the ACA executive, “These guys have been one of the biggest shorts in the market…. I think they have still yet to take a long position.”
“Right,” the ACA executive responded.
In its lawsuit, ACA alleged that Goldman misled it about Paulson’s role in selecting the securities that went into Abacus, and about whether Paulson was investing on the long side. ACA added Paulson to the lawsuit recently.
Goldman says the call “utterly eviscerates any purported belief ACA may have then had that Paulson was a long investor.”
Not so, ACA’s lawyer said. Marc Kasowitz cited another call, between a Goldman executive and an ACA employee, in which the latter described Paulson’s stake as “100% equity.”
“Goldman Sachs’s specific misrepresentation to ACA about Paulson’s ‘100% equity’ interest in Abacus trumps any anecdotal market ‘color’ by a third-party,” Kasowitz told The Wall Street Journal. He added that the Friday motion was a mere “stalling tactic” and an attempt by Goldman to relitigate its failed motion to dismiss in April.
Sep 22 2014 | 4:15pm ET
"I tell people that everybody likes good news and so if you have good performance that’s wonderful,” explains Mike McKitish of Peddie School's endowment, “but it’s the people that want to talk about the bad news or where they drifted and how they came back and how they stayed to their discipline…” that he wants to hear from. Read more…
Sep 30 2014 | 9:29am ET
The crisp Autumnal days of October are upon us, and so are a few of the hedge fund industry’s favorite charitable events. If you have never been to Rocktoberfest, well, you are missing out. And for a quieter evening of sipping and socializing, stop by HFC’s Wine Soiree. Read more…
Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...