" Sell what could be sold as is, repackage and sell everything else " - Keven Gasvoda, MD, Goldman's Fixed income, Currency and Commodities.
"We have been thinking collectively as a group about how to help move some of the risk. While we have made great process moving the tail risks, we think it is critical to focus on the mezz risk that has been built up...the best target, would be to put them in other CDOs"- Stacy Bash Polley, Co Head of Fixed Income Sales.
Goldman had it all figured out before anyone else even had a clue what was going on. Goldman is smart, the team is damn smart. They are the king of repackaging, from MBS to a CDO, from a CDO to CDO squared, they are the best, thats it! In 2010, after getting nailed with a 550$ million settlement for the Abacus synthetic CDO deal involving Paulson (who actually just lost 750$ million today by dumping all his share of Sino Forest, its his turn to get screwed this time) we have here a post by William Cohan about the credit derivative business at Goldman Sachs:
"Goldman's business model is designed around the exploitation of secrecy. Secrecy is organizing principle that governs modern credit markets. Credit default swaps, privately placed structured securitizations (e.g. CDOs), and hedge funds have all flourished-- they dominate the debt markets--because they are all designed to exploit secrecy. They all create extraordinary profits by keeping the rest of us in the dark. So in late 2006, if you wanted to find out what was happening in this newly created synthetic RMBS market, you couldn't find out much of anything. You couldn't find out anything about who bought or sold any CDO, or what was in any CDO, or how any CDO performed, unless Goldman or some other CDO underwriter deemed you sufficiently worthy of their selective disclosures. You couldn't learn anything from the sales or trading activity of mortgage bonds, because the related trading in credit default swaps was kept hidden beneath the surface. You didn't know anything about the trading activity related to the ABX indices, since that, also, was kept secret. And since the privately-held company that owned the ABX, CDS IndexCo LLC, operated in total secrecy, and since the privately-held company that published the price of the ABX, Markit Group Limited , operated in total secrecy, you had no way of knowing the extent to which the price of the ABX was manipulated through round-tripping, side deals with synthetic CDOs, or anything else. The only thing you knew, your only link to the illusory "reality " of market sentiment, was the quoted price of the ABX. And you might happen to know that the Chairman of CDS IndexCo was Brad Levy, a managing director at Goldman, which, along with a handful of other banks, controlled CDS IndexCo and Markit Group. Both the FCIC and the Levin subcommittee disclosed a wealth of information that others with a more skeptical bent can scrutinize in depth. This information poses a direct challenge to Goldman's dissembling, and to the moral hazard of access journalism, which is no substitute for the full transparency of a free and open marketplace of ideas. "
Well here you go, so whoever that wants to argue with me in regards to why Goldman is the best in the business, give me a call.. I'll be more than glad to. And to sum up, here is a diagram of the famous Abacus AC1 Syntheic CDO deal, talk about confusing the hell out of everyone....
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