Such a position implies that Paulson was betting the CDO would increase in value.
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Motive: Goldman was working overtime to unload the CDO it had created to investors.
The SEC enforcement action deals with only one so-called Abacus CDO, but there were others.
The products were called Pinnacle Notes and were a version of collateralised debt obligations (CDO).
In fact, the SEC argues, Mr. Tourre knew Paulson intended to bet the CDO would fall in value.
One of the root causes of the mortgage nightmare, the CDO disaster, Madoff, and Stanford, was investor gullibility.
The third effect will be on the collateralised-debt obligation (CDO) market, which caused so many problems last year.
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Merrill said it marked its CDO holdings to "observable" market values, where there were prices to be observed.
Financial Engineering: Only a few very smart and ill-directed mathematicians can explain what underpins a Collateralized Debt Obligation (CDO).
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It just seems to me that Goldman Sachs should have named Paulson in the offering circular for the CDO.
Each one of these CDO transactions is so complex that 100 million pages would be required to document it.
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Last month the government successfully sold off the MAX CDO assets it a move that was applauded by industry watchers.
Leverage was present both within the structure of the CDO and within the capital structure of many of the buyers.
When Pricewaterhouse Coopers LLC appointed its first CDO nine years ago, the executive worked under the umbrella of the human-resources department.
The structure gives the position accountability and credibility, says Maria Moats, an audit partner who recently became the firm's fifth CDO.
Collateralized debt obligations (CDO) and other structured finance products trade over-the-counter rather than on an exchange, at least in the United States.
"CDO" is a common term for collateralized debt obligation, an investment-grade security backed by a pool of bonds, loans and other assets.
In fact, this is done specifically to indicate that the interest of the Sponsor and those of the CDO manager are aligned.
Now the CDO reports directly to chairman and senior partner Bob Moritz.
The top tier of CDO debt was usually rated AAA because all the other classes had to default before it got hit.
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Having that direct line to the corner office can give a CDO more power and visibility, says Kevin Oakes, who heads the institute.
Not only is it reminiscent, it also is tied by the inclusion of an Abacus CDO as part of the asset base of Squared.
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Still, the Senate permanent subcommittee staffers say ACA people told them that they believed that Paulson was taking an equity position in the CDO.
Magnetar told investors this week that it based its mortgage-CDO strategy on statistical models, not a fundamental belief that the housing market would slide.
Frankly, anyone stupid enough to buy a synthetic CDO should lose their money, but that is not what the courts will base their decision on.
For example, Paulson picked 123 securities it wanted in the CDO.
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Many subprime loans have ended up as pieces of CDOs, and as default rates soar the damage may well spill over into the CDO market.
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