April, 27, 2010

One question we've asked in the wake of the SEC's (SEC news) charges against Goldman Sachs (NYSE: GS): Why is the SEC pursuing such a limited case? Perhaps it thinks it has the goods regarding this one issue. Or perhaps it will target other banks who sold similar synthetic CDOs (CDO news). It does appear that other firms engaged in disclosure quite similar to the disclosure (or lack thereof) that has landed Goldman Sachs in such hot water.

The Atlantic Online reports that Deutsche Bank (NYSE: DB) sold CDOs constructed also for Paulson & Co. (John Paulson news) and sold long to none other than IKB, which took some heavy losses for its yield-chasing. Deutsche Bank employees tell the publication that the role of Paulson was never disclosed. The view was "you're all big boys, you do your own research. Here is what's in the security--you choose if you want it or not. IKB knew exactly what they were buying.