Abacus Deal: As Bad as They Come
Abacus 2007-AC1, the mortgage deal at the center of Friday's civil-fraud lawsuit against Goldman Sachs Group Inc., also boasts another dubious distinction: It was one of the worst-performing mortgage deals of the housing crisis, based on one measure of rating-firm downgrades.
Professor Joseph Grundfest is quoted in this article on the Abacus deal, the mortgage deal at the center of Friday's civil-fraud lawsuit against Goldman Sachs Group Inc. Aaron Lucchetti and Serena Ng of the Wall Street Journal filed this story:
Less than a year after the deal was completed, 100% of the bonds selected for Abacus had been downgraded, according to a February 2008 report by Wachovia Capital Markets, since acquired by Wells Fargo & Co.
Critics say even these measures wouldn't go far enough. The current proposals "don't really address the fundamental issue, which is incentives," says Joseph Grundfest, a professor at Stanford Law School. "Investors need to be put in charge of the process."