Originally Posted by loquitur

Roachboy, Goldman does business pretty much in every money center, so any govt of any clout will have their hooks in to do some sort of enforcement. Once one jumps on board they all clamor.

As for this case, as I understand it what happened went something like this. John Paulson didn't like the mortgage derivatives market and wanted to bet against it, so he went to Goldman and asked them to put together and sell a vehicle he could use that would yield him a gain if the mortgage market tanked. Goldman did that (I don't pretend to understand the ins and outs of how these synthetics work, but so far as I can tell it's a package of contracts that relate to movements in the market for mortgages). Goldman then found a buyer, made full disclosure to the buyer of what was being sold, but didn't tell the buyer that the vehicle was put together at Paulson's request by Goldman.

So the question is: do you consider the fact that Paulson was the seller and had asked Goldman to put the package together to be material to the buyer, or is the material information the actual content of the vehicle that was being sold? Think of it this way: if you're buying a house, and you like the house and you run an engineering report and it's in good shape, should the seller have to tell you that it was custom built for the neighborhood drunkard? It's not an exact analogy, but that's more or less what the fight is about.