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Originally Posted by Tully Mars
See I don't think that Paulson's involvement in putting together the likely to fail mortgages and then having Sach's sell an interest in end product bundle is the issue. The problem was they lead other investors to believe Paulson was long on the investment not shorting it.
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I doubt this was true given what we found out today:
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he government has testimony from a Paulson & Co. official that could contradict its own claims against Goldman Sachs, CNBC has learned.
Paolo Pellegrini told the government that he informed ACA Management that Paulson intended to bet against, or short, a portfolio of mortgages ACA was assembling.
If true, the testimony would go directly against government claims that ACA did not know Paulson was hoping the collateralized debt obligations would fail, and subvert charges that Goldman breached its duty by not informing ACA of Paulson's position.
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News Headlines
ACA appears to know Paulson was going to short the portfolio and they negotiated what was going to be in it. The very nature of the instrument says that there is a short position and a long position, a sophisticated investor who did not understand their risk and do due diligence - deserved to lose their money.
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I guess I should include this for anyone not aware:
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ACA Capital Management was both the final clearinghouse of the portfolio of subprime mortgages and the company that took the biggest loss when the loans collapsed, according to the Securities and Exchange Commission's case against the Wall Street behemoth.
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http://www.cnbc.com/id/36667165
ACA negotiated what was in the portfolio, knew Paulson was involved, knew Paulson was shorting, and Goldman is guilty of what????
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And let's not forget, Goldamn lost money on their investment in the deal as well.