Goldman Sachs Plays Both Sides

The activities of Goldman Sachs in collecting fees by creating and funding SIVS the purchase subprime loans (as an underwriter of the SIV securities) and in profiting as an investor by shorting the subprime loan market are raising eyebrows from Wall Street to Washington.  The size of the short position does not support an argument for a pure hedging position.  At issue is whether Goldman, and other banks that may have done the same thing, mislead investors as an underwriter by pushing secuirties that another part of the bank thought were going to decline in value.  Many are carefully re-reading those underwriting prospectuses.  For private litigants, this is a 33 Act Section 11 liability claim -- easier to prove than Rule 10b-5 liability (which also may be alleged).  The SEC may have an even easier time with Section 17.