This is a real-life David vs. Goliath story and I'm surprised it hasn't been more widely covered in the financial press. The (relatively) tiny Landesbank Baden-Wurttemberg is battling Goldman Sachs (otherwise known as the Vampire Squid) in a US Court of Appeals concerning Goldman's selling worthless securities during the financial meltdown in 2007:
NEW YORK (Reuters) – A U.S. appeals court was asked on Friday to decide whether Goldman Sachs Group Inc and TCW Asset Management Co should have foreseen the housing market implosion that caused a $37 million loss for German state-owned Landesbank Baden-Wurttemberg.
Landesbank accused Goldman of profiting unjustly from Davis Square by charging an excessively high purchase price and fees. It said Goldman also bet against the product by buying billions of dollars in credit default swaps that insured Goldman against the collapse of the mortgage securities collateral it sold to Landesbank.
In 2010, the SEC sued Goldman and a vice president of the firm over another CDO, called Abacus 2007-AC1, accusing them of failing to tell investors the Paulson & Co hedge fund helped choose and bet against the subprime RMBS underlying Abacus.
That Goldman Sachs would attempt to profit from selling junk to its clients and then betting against it should come as no surprise to anyone. Last month a Goldman banker resigned in disgust after watching his managers mislead clients (known inside Goldman as "muppets") to maximise profit for the bank.
There will be many lawsuits and court battles – and not just against Goldman. When will the German taxpayers have their day in court with Deutsche Bank for its fraudlulent dealings with IKB Bank, resulting in a $9 billion government bailout?
