IKB, a lender to small companies which was bailed out last month, had a weakness for exotic products.
Tourre seemed much more comfortable addressing the allegation he misled ACA Management than the allegation he misled IKB.
One of the investors identified in the suit is IKB, a German bank.
Goldman might say that such a disclosure would not have made a difference to IKB, which actually might be true.
By late 2006 and early 2007, when the deal referenced by the SEC was put together, Goldman and IKB had a track record.
Goldman counters that the investors, IKB, a German bank, and ACA Capital Management were given extensive information about the underlying securities and the risks.
Goldman says one of the investors in the deal, the German bank IKB, had made inquiries that led to the transaction known as Abacus.
The oft-mentioned Abacus trade structured by Goldman Sachs for John Paulson and IKB was highly illiquid, and narrowly assembled for the clients in question.
Why didn't the committee call representatives of ACA Capital Management and German bank IKB, the alleged victims on the other side of Mr. Paulson's bet?
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IKB, on the other hand, was an active and eager investor in the structured products Goldman was packaging and selling at the height of the bubble, the lawyers argue.
German lender IKB was one of the first European banks to suffer from subprime problems, and the European Commission currently is examining the legitimacy of the German government's plans to bail it out.
It might not matter that German bank IKB probably would have invested in the CDO and lost its investment whether or not Goldman made the type of disclosures the SEC now claims should have been made.
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French insurer AXA (nyse: AXA - news - people ) and German bank IKB (other-otc: IKBDF - news - people ) have both seen investment funds run into trouble over exposure to risky American loans.
The SEC case insinuates that Goldman was helping one client (Paulson) to the detriment of the others (IKB and ACA Financial, which was brought in to select the portfolio collateral) and that it should have disclosed to the investors that Paulson, now a hedge fund megastar, was on the other side of the trade.
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