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Merrill Used Same Alleged Fraud as Goldman, Bank Says (Update1) - Bloomberg.com

April 17 (Bloomberg) -- Merrill Lynch & Co. engaged in the same investor fraud that the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of committing, according to a bank that sued the firm in New York last year.

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, known as Rabobank, claims Merrill, now a unit of Bank of America Corp., failed to tell it a key fact in advising on a synthetic collateralized debt obligation. Omitted was Merrill's relationship with another client betting against the investment, which resulted in a loss of $45 million, Rabobank claims.

Merrill's handling of the CDO, a security tied to the performance of subprime residential mortgage-backed securities, mirrors Goldman Sachs conduct that the SEC details in the civil complaint the agency filed yesterday. It claimed Goldman omitted the same key fact about a financial product tied to subprime mortgages as the U.S. housing market was starting to falter.

"This is the tip of the iceberg in regard to Goldman Sachs and certain other banks who were stacking the deck against CDO investors," said Jon Pickhardt, an attorney with Quinn Emanuel Urquhart Oliver & Hedges, who is representing Netherlands-based Rabobank.



The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt ät gmail dotcom) on Sun Apr 18th, 2010 at 12:08:39 PM EST
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SEC Is Looking at Other Mortgage Deals - WSJ.com
The Securities and Exchange Commission, after having hit Goldman Sachs Group Inc. with a civil fraud charge, is investigating whether other mortgage deals arranged by some of Wall Street's biggest firms may have crossed the line into misleading investors.

The SEC's case against Goldman Friday has exposed an open secret on Wall Street: As the housing market began to wobble a few years back, some big financial firms designed products aimed at allowing key clients, such as hedge funds, to bet on a sharp housing downturn.

Among the firms that created mortgage deals that soon went sour were Deutsche Bank AG, UBS AG and Merrill Lynch & Co., now owned by Bank of America Corp. It isn't known what deals the SEC is investigating.



"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Mon Apr 19th, 2010 at 04:29:41 AM EST
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Other Major Banks Did Deals Similar to Goldman's - ProPublica
Here is a list of the banks that were involved [9] in Magnetar deals, along with links to many of the prospectuses on the deals, which skip over Magnetar's role. In all, investment banks created at least 30 CDOs with Magnetar, worth roughly $40 billion overall. Goldman's 25 Abacus CDOs--one of which is the basis of the SEC's lawsuit--amounted to $10.9 billion [10].


"Ce qui vient au monde pour ne rien troubler ne mérite ni égards ni patience." René Char
by Melanchthon on Mon Apr 19th, 2010 at 04:53:44 AM EST
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