Goldman Sachs' (GS) Abacus deals have raised eyebrows for a while now for those in the thick of the CDS and synthetic CDO arenas. But the New York Times really put the issues on the map with its recent article on these deals. Which has generated quite a response in the blogosphere. I think it's fair to say that there was a lot of demand for synthetic CDOs and Goldman Sachs and other banks were only too happy to provide the product.

Of course someone has to take the other side of the bet, to play the house, so to speak. And it was usually the investment bank that bundled the deal. You do have to wonder whether these deals were structured to raise the likelihood that the synthetic CDOs would fail. This is something that regulators likely will be looking at. It would have looked better if Goldman Sachs sold off the short pieces to hedge funds. But then how would it have hedged? Its losses would have been higher, and this controversy would have likely been avoided. So is this again the price of success? 

For more:
- here's the article

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