April 26, 2010
It would be better if the rule applied to all securities trades of a minimum size, not just for publicly traded securities.
Then it would, for example, quite possibly prevented the fraud that is the basis for the current SEC case vs. Goldman.
Goldman Sachs claims to be a facilitator in the CDO which brought civil charges filed by the SEC. But from Goldman's perspective the whole transaction only makes financial sense if they are offloading existing CDS liability (in favor of John Paulson) to other parties. At the time the CDO transaction closed, by all public reports, Goldman is moving to short the subprime/CDO market. And yet it takes a long position on this CDO? Goldman claims a loss of $88 million on the transaction. But how much liability did they offload? Ultimate losses on the CDO approach $1 billion. One would have to examine all CDS contracts between Goldman and John Paulson, both before and after the CDO transaction closed, to fully evaluate Goldman's role.
The rule should allow examination of all CDS contracts.
(Attached File #1: s71010-10.pdf)