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Basis Yield Alpha FCIC Report release020811pdf

Basis Yield Alpha FCIC Report release020811pdf

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Published by: chris_clair9652 on Feb 08, 2011
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Media Release: BASIS YIELD ALPHA FUND (MASTER)February 8, 2011 (US EST)
The long-awaited report of the Financial Crisis Inquiry Commission (“FCIC”) hasnow been released. Ironically, earlier in January, Goldman Sachs released its Report ofthe Business Standards Committee which was created to conduct an extensive reviewof Goldman Sachs' business standards and practices.The Goldman Report states as its very first principle “Our clients’ interests comefirst” and CEO Lloyd Blankfein said that the resulting recommendations “represent afundamental re-commitment by Goldman Sachs to our clients, and the primacy of theirinterests.”But as the FCIC Report documents, in late 2006 and into 2007 Goldman put itsown interests far ahead of its clients’ interests; indeed, its entire strategy was premisedon taking advantage of its clients’ trust in the word of Goldman Sachs.This was the experience of the Basis Yield Alpha Fund (Master) which in June2007 invested approximately $80 million in highly-rated securities issued by the nowinfamous Timberwolf synthetic CDO created by Goldman Sachs in the first half of 2007.The Basis Fund is suing Goldman in the Federal Court in New York for losses incurredfrom the investment which turned sour in a matter of weeks.The Fund’s claim centers on Goldman’s fraudulent statements made as part ofGoldman’s aggressive sale tactics surrounding the investment. In order to get thetransaction ‘over the line’ Goldman Sachs’ senior CDO trading personnel assured theFund that it was seeing stability in the secondary CDO market and that the proposedpurchase of the Timberwolf securities was a good entry point into the highly-rated CDOsecurities market.However, as has been made clear by the US Senate’s Permanent Subcommitteeon Investigations and now the FCIC, since at least late 2006, Goldman Sachs in facthad a highly negative view of the CDO market, and was desperately trying to reduce its

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