As Goldman Sachs continues to be in the news, this revelation could affect the SEC’s charges (h/t to HelenK for alerting me to this ):

Testimony Could Undercut SEC Charge Against Goldman

The 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.

CNBC has examined documents in which a government official asked Pellegrini whether he informed ACA CDO manager Laura Schwartz about Paulson’s position in the portfolio, named Abacus 2007-AC1.

“Did you tell her that you were interested in taking a short position in Abacus?” a government official asked Pellegrini, referring to the name of the CDO portfolio.

“Yes, that was the purpose of the meeting,” Pellegrini responded.


Oops. I am guessing that is not the answer they anticipated:

The exchange is key in that the Securities and Exchange Commission is charging that the failure to disclose Paulson’s position was a “material” factor that could have caused both ACA and German Bank IKB to back out of the CDO investment. When the CDO failed, Paulson reaped a gain of more than $900 million, the government has said.

The SEC does not mention the exchange in its complaint against Goldman.

“We look forward to presenting a complete and accurate evidentiary record in court,” SEC spokesman John Nester said in a statement to CNBC.

CNBC further learned that Pellegrini and Schwartz met at least three times to discuss the CDO and Paulson’s short position on Abacus.

Because of the deal’s structuring, Paulson stood to gain $900 million from the deal but lose only $20 million.

Here’s the thing. Couldn’t they have actually done a TAD more investigating before making these charges against Goldman Sachs? I mean, they make the charges just the other day, and voila, a few days later, this testimony comes out completely contradicting their charges. I’m just saying, maybe SOMEONE could have done a little more homework before leveling these charges, don’t you think?

And while I am at it, NQ reader Peggy Sue supplied this fascinating testimony from William Black on Lehman Brothers to the House Finance Committee. It is quite an indictment of a number of federal entities, especially the Fed, as well as the SEC:

Holy smokes. Mr. Black didn’t mince any words, did he? He is exactly the kind of straight talker we need to clear up this big, huge, mess. And he exposes the sheer incompetence of those who have been charged with oversight of financial institutions, especially continuing “business as usual” when that business was costing us millions and millions of dollars.

It sounds to me like there are a helluva lot of people running this show deserving of lawsuits, too – I’m not holding my breath that they will get their comeuppance, though. They’ll probably get promotions…

  • b

    Creeper,

    You and USAA are now lobbying for the big Wall Street banks? What a joke. USAA makes the big claims, but does not actually prove anything about what is actually in the bill. Typical BS from the right. USAA is just another bank that is lobbying. No bank wants more regulation, but sorry tax payers are demanding it.

    By the way how many bad loans did USAA give out in the bubble? USAA is a joke. That bank is a complete rip-off.

    See:
    http://www.ripoffreport.com/Search/usaa.aspx

  • b

    Creeper,

    “Mind your manners.” That is a joke given all the right-wing attack dogs on NQ. As soon as some adds an alternative view they are personally attacked and the comment is deleted on this site. There are no “manners” on this site, at least since it turned into an anti-obama hate site.

  • ~~JustMe~~

    SEC Pushes Back at Criticism Over Porn Surfing Report
    Little job perk here :-
    http://www.foxnews.com/politics/2010/04/23/republicans-slam-sec-porn-surfing-report/

  • Rabble Rouser Rev. Amy

    creeper, my partner got that, too (her dad is a retired 3 star).  I signed it myself last night.  Thank heavens SOMEONE is reading what is in this monstrosity of a bill (create another oversight committee when the one supposed to be providing oversight has done very little?  WTH with that??).

    It will be interesting to see what comes of this…

  • creeper

    Just received the following from Josue Robles, CEO of USAA:

    Rarely in our 87-year history have we turned to USAA members to weigh in with elected representatives on an issue of great importance. But, we are now.
    The U.S. Senate currently is considering legislation (S.3217) that would impose new rules on the nation’s financial services industry, including USAA.
    As the leading provider of financial services to America’s military community, USAA supports financial services reform.
    However, the current Senate bill would disproportionally impact USAA because we are a unique and fully integrated association. USAA is not like the banks and other companies that helped bring down our economy, and we never took a penny of TARP funds. We do not engage in the harmful practices this legislation seeks to resolve.
    If unchanged, the bill would:
    Prevent USAA from managing the association’s portfolio as we have for the past 87 years.Jeopardize our ability to continue offering many of our competitive products.Limit our ability to return money to our members. Last year, USAA returned $1.2 billion to our members in the form of distributions, dividends, and bank rebates and rewards.*

    So, we are asking all USAA members and employees to urge their U.S. senators to amend a portion of the bill, known as the “Volcker Rule,” to eliminate its effect on a company like USAA. Please know that this legislation does not impact individual member’s investments.
    Regardless of the outcome of the legislation, USAA will remain a unique and enduring association that’s all about you — the military and their families.
    Please take action on this matter by immediately contacting your U.S. senator. You may click here to access a special website that will enable you to quickly send an e-mail message to your senator.

    Thank you for your help and support,
    <img src=”http://f.e.usaa.com/i/42/2078198359/ceo_img_jrobles_sig.gif” border=”0″ alt=”Joe Robles Signature”/>
    Josue (Joe) Robles Jr.
    Major General, USA (Ret.)
    President and CEO

    Robles is right…I’ve been a USAA member for almost thirty years and I’ve never seen anything like this from them. 

    Honest banks will evidently pay a big price for the dishonesty of others.

  • creeper

    b,

    There may be good points in your post.  I won’t see them, though.  I stopped reading when you whacked Amy with “You clearly know very little about finance.”

    That was not necessary.  Mind your manners.

  • confused American

    In looking at what is Bill and Hillary are doing and saying with and regarding Obama….there is something definitely going on..
    I do not feel the same about either of those two.
    I have a feeling that Bill and Hillary are now puppets of the Obama people/administration.

  • karen for Clinton

    I cannot believe you just accused Bill of those things and that so many people agreed with you.  I had to re-read it to make sure you weren’t talking about bo, but your final sentence shows you did mean Bill.   A few days ago you made some highly inacurate statements including one about Hillary and Alinskyy.  In another thread you smeared Hillary and Bill as well.

    The whole reason many of us found NQ was the bashing of Hillary and we all defended her.  Now I have to read attacks about her here that go unchallenged and even worse are widely supported.

    I don’t think so. I am very surprised and disappointed, frankly with the unfounded accusations against Bill and Hill.  I might have voted for McCain, but he sure as hell wasn’t my first choice.

    My name says it all.  I am as proud of her today as I was back then.

  • b

    Amy,

    You clearly know very little about finance. It is likely irrelevant if a couple of people had a conversation. The reality is that Goldman should have told all investors through disclosure in an official prospectus how exactly the synthetic CDS was put together. They screwed their customers by not telling them that the investor on the other side of the trade was the one who actually put together the investment. Goldman even went further (email proof) that they themself believed that the investment would fail and therefore explictedly knew they were screwing their investor clients. The fraud is in the larger disclosure issue, not in one or two private conversation. The issues is also more troubling for Goldman than the actual fraud charges, as it shows the Goldman was willing to screw its customers. That is far more damaging in an industry were reputation is extremely important. 

  • sowsear

    Works just like the Great ACORN Move…

  • sowsear

    Methinks, you ask too many damn questions…

  • Rabble Rouser Rev. Amy

    Ah, Just Me – you didn’t have to do that!!  Very sweet of you, though!  Thanks!

  • BuzzLatte

    Barky makes a speech on April 19th saying that the GOP is the party of Wall ST.  However, in the 2008 elections dems received four times MORE money from Goldman Sachs in contributions than the GOP  4+ million to 1+ million.  Obama alone gets just under 1 million.

    Another day, another lie from Obama.  

    Oh, and apparently he took money from Rezko, too!  Much more than Obama said!?  

    Tick tock tick tock

  • creeper

    From that Politico link:  “In March, for instance, the GOP reaped more contributions from Goldman’s PAC, which doled out $167,500 to Republican candidates and causes, compared to $123,000 to Democratic ones.”

    Looks like Goldman Sachs is betting on Reps next time around.  They’d better be careful about stiffing the Dems.  Barry has a temper.

  • creeper

    At the risk of committing sacrilege, it’s hard to see anything wrong with that list, HARP.  After what those thieves did I have no problem with putting ’em on a short leash.

    But from what I’ve seen of the bill, it’s got enough loopholes to drive a convoy through. 

  • Ferd Berfle

    Early and often is the motto for action on comments associated with PO.

  • creeper

    That was nice, JM.

  • creeper

    I see PO is up to his old tricks.  Or did the flagging remove the comment?

  • creeper

    Diana, I did the same thing…skipped over Linda’s videos because I didn’t have the patience to wait while they loaded.  I’m glad Amy posted one more this morning.  It got me off my duff and back to Linda’s post.  What wonderful stuff.

  • getfitnow

    Whoa, and I was all wee-weed up about Bush’s use of warrentless wiretapping.

  • getfitnow

    I heard a clip of That One today. He was asked about the donations from GS. the first lying words out of his lying mouth were “I received a lot of money from a lot of people and most of it came from small donations.”

    It’s frightening how easily this guy lies.

  • AbigailAdams

    But the bailouts were a complete whitewash of the underlying problems.  Can’t imagine why the banks would want to give all that money back w/interest when do otherwise would expose the dry rot underneath the bailout in the first place.  The TARP money simply gave the financial houses another year in which to play their three card Monty and scrape away anything that was left of unwitting shareholders’ (waiting for the stock prices to go up again) money.

  • ahs

    Fortunately, nobody’s talking about that happening.  In fact, I don’t believe anybody is talking about any agency that is not independent (the SEC is an example of an independent agency; the Department of Justice is an example of an agency under executive control) having regulatory authority over banks.

    So, again, nobody’s proposing anything that is unlike the basic bank regulatory structure in place since the Depression.

  • No Longer Banned in Beantown

    Hey Junior – GS is not guilty? Where you been boy? Just wake up from a ten year snooze did ya?

  • Docelder

    The large banks have been saved. A lot of the smaller banks were just the right size to fail or to be bought out by the big banks. This was in part a giant feeding frenzy where the big sharks gorged themselves on a lot of the baitfish. It isn’t over for the middle class. Because we still exist.

  • No Longer Banned in Beantown

    No slap on the wrist… The O’Barky regulations are a Kiss of the Ring.

  • No Longer Banned in Beantown

    …or tell you its raining while they piss down your back… A great line from The Outlaw Josey Wales.

  • No Longer Banned in Beantown

    I hope they get a picture of Obama stuffing as many shrimp as he can into his mouth.

  • Diana L. C.

    O.K. — I, too, was struck by William Black’s testimony.  He seems to have a great handle on things financial.  So, since I didn’t have time the other day, I took some time to go back to Linda Anselmi’s recent post to watch the Real News’ series of interviews of Black that she posted.  What an education I got.  I recommend that everyone take time to watch that series.

  • No Longer Banned in Beantown

    Most of the bailout money to banks has been repaid plus interest. The banks have been saved, but not the people or institutions that bought into the fraudulent investments.

  • No Longer Banned in Beantown

    I agree. William Black correctly testifies that the Fed was not using its regulatory power, and turned a blind eye to these fraudulent deals.

    Geithner, Bernanke and Greenspan are all full of shit when they say the Fed did not have enough power to step in to stop Lehman and others before disaster. They are just covering their asses.

    The chiefs at the Fed have had too cozy a relationship with the banks they regulate, and the heads of government agencies that oversee it.

    Any new regulation should start with breaking those ties and revolving doors.

    On an interesting note, if you live near SF stop into the Fed Bank on Market Street. They have an excellent self guided tour of the Federal monetary system. There are stations located throughout the expansive lobby, with recorded lessons that start with a push of a button.

    I don’t know if other Fed branches have self guided tours.

    If you can wrangel a private tour they will show you the gold. It is not all at Fort Knox. One of the Die Hard, from watching a crappy actor in these crappy movies, depicted the gold at the NY Fed.

  • jwrjr

    I wasn’t (intentionally) defending GS either.  However, I see how my first comment could be taken that way.