If you are remotely connected to the outside world, you know that on Friday the SEC filed civil charges against Goldman Sachs. Specifically, for their role in structuring and marketing certain CDOs for subprime mortgage backed securities at the request of hedge fund owner John Paulson. That morning, I stepped out a conference room to look down at a glistening Lake Michigan and enjoy some sub-par office coffee. As I casually looked over at one of the flat screens – “GOLDMAN SUED BY SEC” scrolled across the CNN ticker.

I had a good buddy at a bulge bracket bank I lived with in NYC for an internship, so I gave him a call. “SHIT has hit the fan dude!” His supervisor was on vacation. He was on a trading desk, now responsible for telling a multiple array of large clients some financial news that was going to spur an eruption of transactions. “It was fucking crazy. Everybody thought Deutsche Bank was gonna get charged too. It was like, are we next?” But for him – volatility is good.

Will other banks be implicated in the sale of these securities? Maybe. It’ll be interesting to see. The media has definitely wound up into a frenzy – “Deception” was the theme title on CNN’s Anderson Cooper 360 segment discussing the issue.

Basically, the SEC believes Goldman didn’t disclose vital information to investors about the role Paulson & Co. had in the portfolio selection process, and its short position against the CDO. A vice president at Goldman responsible for the deal, Fabrice Tourre and his specific e-mail exchanges are named in the charges. Conflicts of interest of this order happen to exist in shitloads of financial deals. It is essentially irrelevant what position Paulson & Co. took against the security. It has no bearing what fucking stance John Paulson had on the housing market.

The SEC needs to prove that Goldman intentionally withheld material data or even misled investors – and influenced them to buy the product. Yeah, good luck with that. Lloyd Blankfein ain’t no bitch. This dude has 99 problems…and the SEC, well, is a pretty big one, but will be dealt with. Goldman and their law firm stated their confidence in the expertise of the advisory firm ACA Management, who managed the deal as well their acknowledgement of the shrewd professionalism of Paulson & Co. These are credible Wall Street veterans. C’mon now.

Being that it was a relatively new and complex financial instrument, from a legal perspective this will work to Goldman’s advantage. The Fratrepreneur believes it’s very probable that the SEC will take this approach: Hate the Playa. Not the game. Not to say that Goldman won’t face some government reprimand, but Tourre is definitely ripe to be the scapegoat of this debacle. From the SEC report, he was personally responsible for structuring the transaction, creating various marketing material, and being in direct communication with investors. Ouch. Sorry buddy. Tell Bernie we said “Hi”.

Oh yea, another call I made that day was to one of my best friends who actually works for Goldman. Figures, he’s literally a genius. He said it was a “strange” day. But we had more important matters to discuss. We booked our flight and hotel for a lil summer vacay to Ibiza. Why dwell on things beyond your control? What we didn’t know is that Goldman’s “buy” rating would be at a five year high after the weekend (on Monday twenty-two firms advised that their clients purchase Goldman Sachs). I mean…Work Hard. Frat Hard.

Seems like the New York Times share our thoughts on the issue:

NYTIMES- A Difficult Path in Goldman Case: “WASHINGTON — In accusing Goldman Sachs of defrauding investors, regulators are not only taking aim at a company with deep pockets and a will to fight — they are also pursuing an unusual claim that could be difficult to prove in court, legal experts said.”