5 Dumbest Things on Wall Street: April 23

It doesn't get any bigger — or dumber — than this.

Yes, we are talking about the Securities and Exchange Commission case against Goldman Sachs (Stock Quote: GS) (GS) , and in honor of this momentous occasion, we here at The Five Dumbest Lab are devoting an entire column to the battle. That's right, it's all Goldman, all the time. Or at least for this week.

Before we get started, however, here is a quick recap over what the two parties are squabbling about — just in case you have been living under a rock or sleeping in a European airport due to volcano-related delays.

(GS) Goldman Sachs "defrauded investors by misstating and omitting key facts" about subprime mortgage securities it sold to investors, according to a complaint filed by the SEC last Friday. Specifically, the SEC is alleging that Goldman "structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS)."

The charges involve a transaction that Goldman structured for hedge fund Paulson & Co. that allegedly allowed the fund to take short positions against mortgage securities. Goldman then allegedly marketed a CDO including the subprime securities to clients without telling them that Paulson & Co. had participated in selecting what subprime securities to include, and that it was taking a short position against the CDO.

(GS) As for Goldman, the investment bank issued a terse response to the complaint, saying the charges are "completely unfounded in law and fact" and vowed to "vigorously defend the firm and its reputation."

As for us, we can't get enough of this stuff. Enjoy!

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