Goldman CDS trading activities under fire

Goldman Sachs ’ trading activities in the credit insurance market in 2007 have come under attack from a US senator after e-mails revealed a senior trader urged colleagues to “kill” some investors’ positions.

Carl Levin, chairman of the Senate permanent subcommittee on investigations, told a hearing on Wednesday that the alleged activity “looks like a trading abuse to me”, although he added that at the time in question the credit insurance market was unregulated.

Mr Levin said that in May 2007, Goldman adopted a “short squeeze strategy” to drive down the price of credit default swaps on troubled mortgage-backed securities. Mr Levin alleged the move, which Goldman denies, would have enabled the bank “to purchase the CDSs for itself at artificially low prices”.

The subcommittee’s probe uncovered a document revealing a second trader stating that Goldman “began encouraging a squeeze” – a strategy that never materialised due to market conditions.

Mr Levin’s attack opens a potential new front in the controversy over Goldman’s trading practices. In July, the bank paid $550m (€416m) to settle fraud charges from the Securities and Exchange Commission over an MBS sold during the financial crisis.



“We should start killing the . . . shorts in the street,” Mr Swenson wrote in an e-mail to Deeb Salem, a trader, in May 2007. “This will have people totally demoralised.”


Source :

http://www.ft.com/cms/s/0/b3c7978a-03e1-11e0-8dd2-00144feabdc0.html#axzz17hTzfw99

Yeah, that´s every days action at Goldman desks :"Kill investor positions." :eek:

 

Goldman said on Thursday: “This type of language sounds awful and is very disappointing, but it does not reflect the reality of what happened. There was no short squeeze.”

Well it does reflect the reality of the trader's thinking.

And he was dumb enough to put it in writing.

Close these corrupt mf out of business. Oh no, they can't because they manipulate the stock and commodity markets on behalf of the privately owned but 'quasi-Government' Federal Reserve.

 

isn't that what anyone thinks when they put an investment on, either i'm going to take money from the bears or bulls, depending on your position. i'd rather have someone working for me that wanted to kill the guy taking the other side of the trade than put his kids through school.

 

And it's even better when you know what the other guy's position is because he's your client!

That's like beating on a guy who has his hands tied behind his back. It can be very demoralizing to the guy!

 

CDS market is all about speculation... and in speculative markets "running stops" is a very common practice.

"Investors" buy bonds without leveredge and hold most of them till maturity.

 

The problem is there is no limit to what they can do.