April 16 (Bloomberg) -- Paulson & Co. rejected Wells Fargo & Co. subprime mortgage bonds for a security it helped to structure with Goldman Sachs Group Inc. because the quality of underlying loans was too high, according to documents from the Securities and Exchange Commission.
Goldman Sachs was sued today by U.S. regulators for failing to disclose to investors that Paulson, the New York hedge fund, was betting against collateralized debt obligations, known as Abacus, and influenced the selection of securities for the portfolio, the SEC said. Paulson wasn’t accused of wrongdoing.
Paulson excluded Wells Fargo mortgage bonds for inclusion in the Abacus deal because the San Francisco-based bank “was generally perceived as one of the higher-quality subprime loan originators,” the SEC said in the lawsuit.
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