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Little Scottie #97 / Done and Dusted (4/19/10)

The wait for Josh Selby isn't the only thing that's over.
The wait for Josh Selby isn't the only thing that's over.
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Mon, Apr 19, 2010 - UDK, Page 6A
Late last week, the Securities and Exchange Commission (not the Southeastern Conference) filed a civil suit against Goldman Sachs, the most prestigious and powerful investment banking firm in the U.S. and, by many accounts, the world.

Here's my layman's take on the story. The SEC is suing Goldman for allegedly defrauding investors. According to published reports, when the housing market was booming, a couple of guys at Goldman created a series of funds each containing a bundle of mortgage securities that they believed were on the brink of failure. They essentially bet that the value of the bundles would plummet, which over a period of 2-3 years is exactly what happened. Meanwhile, one of the guys who devised the funds in the first place reportedly convinced clients – such as two of the biggest banks in Britain and Germany – to invest in these bundles. The clients bet with rather than against the bundles' value, thinking that they would soar. When they did the opposite, the banks and others lost billions whereas Goldman posted billions in profits.

Because the actions were ethically questionable and people want some sense that Wall Street is being held accountable, the SEC has filed the lawsuit. However, by many accounts, the SEC has a weak case. They want to make an example of the biggest fish in the sea, but as much as what Goldman did pisses people off, it seems that it might not have been illegal.

Other topics:
Over the weekend, Bill Self's courtship of high school phenom Josh Selby finally ended with Selby formally committing to play at Kansas. And there was perhaps the most boring baseball game I have ever witnessed a mere four hours east in St. Louis, where the Mets managed to eke out a 2-1 win after 20 innings, the first 18 of which were scoreless.
Scott A. Winer / Writer, Little Scottie

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