I really am starting to think the case against Goldman Sachs is kind of weak:
The SEC’s complaint against Goldman Sachs alleges that it defrauded clients by conspiring with hedge-fund manager John Paulson to create collateralized debt obligations on subprime mortgage bonds that were almost certain to go bad. Paulson made $1 billion shorting these toxic assets. And who was foolish enough to buy them? The German state-owned bank IKB was one major victim, promptly losing $150 million, according to the SEC. The Wall Street Journal’s David Wessel calls IKB “hapless.” Apparently nobody ever thought “Achtung!”
At the time no one thought house prices would collapse, so these securities probably didn’t look so bad. In some ways this suit seems like an attempt to cover for a market failure, after all the masters of the universe who run Wall Street could never be wrong, unless of course someone defrauded them.