S.E.C. sues Goldman over bets against housing

It seems Goldman Sachs has larger problems than its employees’ complaints about the company’s new 200 West Street headquarters. The Securities and Exchange Commission filed a civil suit today that accuses the bank of engaging in securities fraud when it bet against a mortgage investment it was also selling to customers. The suit cites an investment called Abacus 2007-AC1, a bundle of mortgage bonds created in 2007, allegedly so that hedge fund manager John Paulson could bet against them. Paulson made an estimated $3.7 billion in 2007 on bets that the housing bubble would burst, according to the New York Times. Meanwhile, Goldman also sold the destined-to-fail Abacus deal to investors including foreign banks, pension funds, insurance companies and other hedge funds. Abacus was one of 25 deals of its kind — that is, investments created so that Goldman and certain clients could make negative bets against the housing market. [NYT]