Not being a lawyer I can't give an expert opinion about the SEC's civil suit against Goldman Sachs. However a couple of Goldman's arguments seem pretty weak to me. First the fact that Abacus investment had been designed and constructed to perform poorly was obviously material to any potential buyer and Goldman's arguments to the contrary are nonsense. Second the fact that Goldman itself lost money on the investment is not important. Even if Goldman was stupid enough to invest knowing all the facts, this doesn't mean the other investors would have been equally stupid if they had been properly informed of all the material facts. And of course there is considerable evidence that Goldman's loss was due to a failed gamble that they could unload all of their share before the roof fell in and not because Goldman thought Abacus was a sound investment.
On the other hand there have been suggestions that, even if Goldman did not formally inform the buyers of certain material facts, the buyers were aware of them anyway. If this should be established it would certainly damage, perhaps fatally, the SEC's case.
One point I have not seen covered is what the rating firms were told. Presumably Goldman has the same duty to disclose material facts to them. Did they actually rate this stuff triple A knowing it had been constructed to fail?
1 hour ago