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Politics : View from the Center and Left

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From: Wharf Rat	10/24/2011 12:21:06 PM
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'Best short EVER!' ends up costing Citigroup $285M The SEC said Citigroup Global Markets Inc. made a deal with Credit Suisse Group AG's asset management unit for the latter to purportedly act as an independent adviser and assemble a collateralized-debt-obligation [CDO] portfolio tied to the U.S. housing market. In fact, Credit Suisse agreed to let Citigroup pick about half of the assets. Citigroup took a $500 million short position in the specific group of assets that it had selected for the underlying investments, according to the SEC complaint filed in U.S. District Court for the Southern District of New York. The CDO defaulted in November 2007 and left investors with a worthless investment, while Citigroup made $160 million in fees and trading profits. *On Feb. 28, 2007, the day that the transaction closed, an experienced CDO trader wrote in an e-mail that the portfolio was “dogsht” and “possibly the best short EVER!”** the SEC said in its complaint. “Investors were not informed that Citigroup had decided to bet against them and had helped choose the assets that would determine who won or lost,” said Robert Khuzami, director of the SEC's Division of Enforcement. and The Goldman Sachs Group Inc. agreed in July 2010 to pay $550 million to resolve claims that it failed to tell investors in a mortgage-linked product that a hedge fund betting against the CDO helped select the underlying assets. JPMorgan Chase & Co. agreed in June to pay $153.6 million to resolve similar claims related to its sale of a CDO in 2007. also Our View: Banks' Wrongs Too Numerous to Comprehend

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