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On Tuesday, April27, Senator Levin, who is the chairman of the Senate Sub-committee investigating Goldman Sach’s involvement in collateralized debt obligations (CDO’s), questioned several Goldman Sachs executives on their management of Timberwolf I. Timberwolf I was a $1 billion CDO that collapsed just 5 months after its inception. Carl Levin determined that Goldman Sachs made roughly $3.7 billion from shorting CDOs in 2007, of which Timberwolf I was one. This came during a time when their investors lost millions in investments from buying these CDO’s that Goldman created.

Thomas Montag who was the former head of sales and trading at Goldman Sachs called Timberwolf I “one shitty deal, in an internal e-mail released today by Senate lawmakers. Was Thomas Montag fired for his dealings in this matter? Why not at all. In fact, rewarded. Bank of America hired Montag to be the president of global banking and markets. He’s a good guy. Matthew Bieber, Goldman’s trader who was responsible for controlling the deal, described the day when the Timberwolf security was released as “a day that will live in infamy”. This was the same language used by President Roosevelt after the Japanese attack on Pearl Harbor.

Timberwolf I was one of the securities that Goldman Sachs sold to its clients after they decided to reduce their mortgage holding. Bear Stearns, now liquidated, was among the buyers of Timberwolf I for about $300 million. Within five months of the CDO’s issuance, Timberwolf I lost 80% of its value and the Bear Stearns hedge funds collapsed.

Wikipedia’s definition of a wolf “is the largest wild member of the Canidae family. It is an ice age survivor originating during the Late Pleistocene around 300,000 years ago. DNA sequencing and genetic drift studies reaffirm that the wolf shares a common ancestry with the domestic dog. Gray wolves are typically apex predators in the ecosystems they occupy.” The main definition here is “predators”. What precisely is the definition of a predator? “Any organism that exists by preying upon other organisms.” Timberwolf I definitely showed Goldman Sachs to be a “predator.”

Timberwolf was far more than just a “bad deal” for its victims. Just by listening to Goldman execs at the hearing, they all said the very same thing, that they made some “bad business decisions”. While they take “responsibility” for their “bad decisions,” none of them was willing to say that Goldman had any wrongdoings in what they did. Here’s the reality: if Goldman Sachs in fact did withhold salient information from Bear Stearns about the viability of Timberwolf, that would be much more than wrongdoing as regards futures trading.

There is another unfortunate victim of Goldman Sach’s Timberwolf I, Basis Yield Alpha Fund. Basis Yield was a hedge fund ravaged by Goldman’s Timberwolf I. They purchased $100m just before Timberwolf collapsed. Their hedge fund also collapsed. You can bet that Basis Yield Alpha Fund is very interested in the Goldman Senate hearings.

By far and away, the key question that was asked of Goldman Sachs executives at the hearing came from Senator Susan Collins. She questioned all the executives, asking them the same question: whether Goldman Sachs has a “duty to act in the best interests of their clients”. The responses from the executives were unbelievable. Dan Sparks paused and said, “I believe we have a duty to do well for our clients.” He actually said “I believe”. Fabrice Tourre, executive director in structured products, stated “I do not believe we act as an investment adviser to our clients,” Fabrice Tourre does not believe duty is part of an investment banker’s responsibility. Hmmm…what do these executives think an investment banker does. Do they think that an investment banker’s job is to prey on its clients?

Barbara Cohen has been a professional day trader for over 10 years. She has trained hundreds of day traders in trading futures with Shadowtraders online day trading strategies. As the CIO, Barbara frequently hosts Shadowtraders daily online trading chatroom. Before you purchase any trading software, make sure you attend Shadowtraders Monday Night Webinar, and hosted by Barbara Cohen

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