None of Taiwan's banks, securities firms or insurance carriers has exposure to the failed synthetic collateralized debt obligation issued by Goldman Sachs & Co., according to the Cabinet-level Financial Supervisory Commission on Monday. The United States Securities and Exchange Commission on April 16 filed securities fraud charges against the Wall Street powerhouse for making material misstatements in connection with a mortgage investment with the name ABACUS 2007-AC1. According to the SEC complaint, Goldman Sachs failed to disclose that a third party “with economic interests directly adverse to investors” played a significant role in the deal. Investors in the liabilities of ABACUS 2007-AC1 are alleged to have lost over US$1 billion, the SEC statement read. In light of the SEC complaint, the FSC immediately requested local financial institutions to examine their portfolios. Preliminary results show zero investment by Taiwanese firms in the financial instrument. In addition, none of Taiwan's banks has issued any structured notes against the troubled CDO. The assets backing debt securities issued by local financial institutions in 2007 do not include the Goldman Sachs product, either, the FSC said. The SEC accusations are “unfounded in law and fact,” according to a strongly-worded press release issued by Goldman Sachs. “We will have to see how the case will unfold,” said FSC Minister Sean Chen. The Goldman Sachs scandal sent Taiwan's stock market lower April 19. The TAIEX, the local benchmark index, plummeted 257.35 points, or 3.17 percent, to a one-month low of 7854.22 points. While the local bourse was affected, “it does not warrant the activation of the national security mechanism,” said Minister of Finance Lee Sush-der.
