Quote Originally Posted by tequila View Post
Just to pimp this great Propublica piece one more time, the parties involved (Paulson & Co and Goldman) were doing a variation of the Magnetar trade - creating a CDO designed to fail, selling the CDO to investors, and buying CDS insurance to profit from its failure. Paulson as the driving force, with Goldman as enabler and marketer to the investors. Goldman is being sued by the SEC for essentially hiding information/lying to investors.
I haven't read through any of the documents on this yet. But my first impression is: "isn't this what a market maker does?" When dealing with sophisticated investors, generally you don't need to spend lots of time worrying about whether that investor has made a reasonable assessment of risk exposure - it's assumed that they're capable of doing it themselves, hence the characterization of "sophisticated investor." I guess I don't understand why this is an issue.

That's not a defense of Goldman, but just an initial reaction. Am I overlooking something?