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CDOs: Update 1

April 19, 2010

There’s traffic coming on and out for this important financial topic..

For starters, BigT writing of the SEC bringing charges against GS as follows..

On Friday it accused Goldman Sachs of fraud for marketing collateralized debt obligations (CDOs)—essentially packages of mortgages—without telling investors that they had been specifically designed to perform badly. The idea was to create a financial instrument it could bet against. As Daniel Gross @ slate.com says, this is like putting up a poorly-constructed building just so you could buy insurance on it—and, of course, hiding its poor construction from the insurance company. Goldman made huge amounts of money selling these deceptively bad investments, and the clients who bought them took a bath, according to the charges losing $1 billion on these transactions.

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