Tuesday, October 05, 2010

The MERS Mess Gets Messier

Noted by Denninger:

Landesbank Baden-Wuerttemberg, a German state-owned bank, is suing Goldman Sachs over a $37 million loss on its investment in its share (a tranche) of a CDO called Davis Square VI. TCW, the manager for all of Goldman Sach's Davis Square deals, is also being sued---(Denninger quoting HuffPo)

"Goldman knew at the highest levels of its organization that its representations to LBBW Luxemburg that the notes merited triple-A ratings and were high grade were blatantly false," the Stuttgart-based bank said. "Goldman committed fraud and, or, was negligent in marketing and selling the notes to LBBW Luxemburg." (HuffPo quoting newspaper)

Techically, the lawsuit is not "MERS Mess", it's about fraud. The Bank states that Goldman misrepresented the quality of the mortgages it sold as part of the CDO.

But it's going to be part of the MERS Mess, too, because in all likelihood, Goldie never had, nor never transferred, the original note.

This is not a good time to buy commercial paper from Citi, BofA, Chase, or GMAC/Ally--nor to buy a negotiable CD from any of them, folks.

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