If Goldman (GS - Get Report) owned a piece of Abacus (the mortgage product at the center of the SEC's fraud charges), it is hard for me to believe this case is as open-and-shut as the government is making it.
Yet that is my understanding of the situation. In other words, what is Exhibit A against the government's case? That Goldman believed in the paper itself.
I also think that there is simply an important issue here that the government is leaving out. Goldman does not sell washing machines. They do not sell vacuum cleaners. They sell pieces of paper that are fully disclosed, and you can go long or short them based on the info. There is no guarantee. There never has been.
These are sophisticated clients. They have the ability to look over the material they are shorting or buying. The information is available. They have the ability to do more due diligence than just asking the rating agency.I think this is very important to consider: if Goldman owned a piece of the paper, as I understand to be the case, and if Goldman did not have discretion over the German bank that bought the paper, and if Paulson didn't pick knowingly fraudulent pieces of paper that Goldman was in on, I just don't think the case is a great one. But it's a terrific excuse to sell. At the time of publication, Cramer was long Goldman Sachs.