The WSJ's Got It!

"The [SEC's] complaint against Goldman Sachs is playing in the media as the Rosetta Stone that finally exposes the Wall Street perfidy and double-dealing behind the financial crisis. Our reaction is different: Is that all there is? ... Far from being the smoking gun of the financial crisis, this case looks more like a water pistol. ... Regarding the second point, the offering documents for the 2007 CDO made no claim that we can find that Mr. Paulson's firm was betting alongside ACA. ... More fundamentally, the investment at issue did not hold mortgages, or even mortgage-backed securities. ... Perhaps the SEC's enforcement division doesn't understand the difference between a cash CDO--which contains slices of mortgage-backed securities--and a synthetic CDO containing bets against these securities. ... Did Goldman have an obligation to tell everyone that Mr. Paulson was the one shorting subprime? ... Mr. Paulson bet against German bank IKB and America's ACA, neither of which fell off a turnip truck at the corner of Wall and Broad Streets. ... By the way, Goldman was also one of the losers here. Although the firm received a $15 million fee for putting the deal together, Goldman says it ended up losing $90 million on the transaction itself, because it ultimately decided to bet alongside ACA and IKB. ... Which leads us to the real impact of this case, which is political. The SEC charges conveniently arrive on the brink of the Senate debate over financial reform, and its supporters are already using the case to grease the bill's passage", my emphasis, WSJ Editorial, 19 April 2010, link:

http://online.wsj.com/article/SB10001424052702303491304575188352960427106.html.

Yes, convenient. Coincidence? We don't think so. Why did the SEC choose this case? See my 5 May 2010 post: http://skepticaltexascpa.blogspot.com/2010/04/vampire-squidking-canute-of_25.html. That the case is weak is a Yves Smithian "feature. not bug". Vampire Squid's losing money on this deal means nothing to me, except possibly that was one of the SEC's considerations in selecting this deal for "enforcement"