Quote Originally Posted by Schmedlap View Post
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?
A couple of things.

GS was not just out there posting market prices and collecting the tolls on a liquid market, like vanilla bonds or stocks. GS created Abacus, helped stuff it (knowingly) with synthetics that referenced crap securities, and pushed it to investors without advising them that it designed Abacus at the request of John Paulson specifically so that it would fail and fail badly.

There was no "market" in Abacus to make. GS had a time bomb it wanted to sell because it thought it would make money from the explosion, and it hid information in order to sell it.