It's well-known that former Deutsche Bank CDO wunderkind Greg Lippmann, who's now working for Fred Brettschneider's new hedge fund Libre Max, is a sushi freak.

Seriously. Lippmann loves his sushi and demands only the finest here in New York; so much so that for years he's been compiling a famous excel spreadsheet of the city's fine raw fish-eating establishments.

The best part of his spreadsheet is that Lippman includes minute details about where to sit, who to talk to and his favorite things about the place.

We're not going to bother with the bottom of the list at the moment - we want to revisit the top dogs.

(Note: The list we acquired was last updated in August of 2008 - h/t to @colinjnagy for pointing this out to us)

First a quick guide to understanding Lippmann's lingo:

Lippmann has codes for what neighborhood each restaurant is in. Here's how it works:

Downtown East = 1
Downtown West = 2  
Midtown East = 3
Midtown West = 4
Uptown East = 5
Uptown West = 6

He also uses code for the amount of times he's frequented a particular place. Here's how that works:

F = He went 1-5 times
S = He went 5-10 times
M = More than 10 times

20. Matsuri

Address: 16th and 9th
Reservations: Yes
Frequency: M
Last Time: '05 Spring
Neighborhood: 2
Notes: "Trendy and Tasty. Reasonably priced."

19. Hedeh

Address: Great Jones / Bowery
Reservations: Yes
Frequency: F
Last Time: '06 Summer
Neighborhood: 1
Notes: "Definitely worth checking out."

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Last week, we told you all about Greg Lippmann's special sushi spreadsheet that has over 100 New York City sushi restaurants on it rated in a methodical fashion.

We detailed the top 20 places and showed you how to read Lippmann's cryptic lingo. For example, a frequency of "M" designates that Lippmann had frequented an establishment more than 10 times.

This time we're back with the worst places you can get sushi in NYC. Stay away from these places unless you have an iron-lined stomach.

Again, a quick guide to understanding Lippmann's lingo:

Lippmann has codes for what neighborhood each restaurant is in. Here's how it works:

Downtown East = 1
Downtown West = 2  
Midtown East = 3
Midtown West = 4
Uptown East = 5
Uptown West = 6

He also uses code for the amount of times he's frequented a particular place. Here's how that works:

F = He went 1-5 times
S = He went 5-10 times
M = More than 10 times

20. Ten Kai

Address: 56th between 5th and 6th
Reservations: Yes
Frequency: F
Last Time: '01 Fall
Neighborhood: 4
Notes: "Quiet, affordable."

19. Choshi

Address: Irving Place
Reservations: Yes
Frequency: S
Last Time: '00 Winter
Neighborhood: 1
Notes: "Decent, shorter lines than Yama but right nearby."

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First the important details about Greg Lippman's new fund, Libre Max.

Lippman and his partner, Fred Brettschneider, have assembled their team (a number of Deutsche Bank traders have left the firm in the past few months to join the start-up hedge fund), and they are now making pitches to investors for Libre Max. But so far, they have not brought in any money.

From the Observer's profile of Lippman:

"We've been received warmly. Time will tell whether that means that money is coming in or not," Mr. Lippmann said. "People have been happy to meet us. They've said, 'We've enjoyed your presentation, you guys seem like you've got a good idea.' But it's free to say that."

One possible reason? They're some of the few bulls out there right now.

According to a source who saw Lippman's pitch for Libre Max and told the Observer about it, Lippman doesn't have the next "big short," but he's confident there's money to be made out there.

"I am cautious and I can make my way through the jungle and pick securities that are going to do well," Lippman says.

Another possibility? Let's talk about the funny-sounding name. It sounds like the punchline to a joke or the name of a band.

Here's what it means, according to the Wall Street Journal:

The Libre Max name is meant to suggest "open ideas" relating to investment opportunities, a person familiar with the matter said. "Libre" also incorporates the first two letters of Mr. Lippmann's name as well as Fred Brettschneider's, who has been Deutsche's head of global markets for the Americas but is joining him. "Max" incorporates the last names of the other two founders.

The incorporation of names is a decent explanation. That's pretty much what every hedge fund manager does - make their fund their initials or last name or something. But here's another idea.

We know Lippman likes t-shirts (he handed out "I'm short your house!" t-shirts a few years ago). Then he names his fund Libre Max, which happens to, in our imagination at least, look fantastic on a t-shirt. Just putting that out there because we can't take the name seriously.

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One of the few guys who predicted the subprime crisis and bet that the bubble would pop, Greg Lippman, is struggling to perform well this year at his new hedge fund literally just launched his hedge fund (in October), and we were a little harsh.

His fund manages ~$400 million, it's just out the gate, and it's up 1.67%. 

That's pretty cool, especially considering that tons of hedge fund managers are just giving up in this environment because (it seems) they can't find enough to invest in.

To put LibreMax's returns in context, Lippmann's fund, LibreMax's, 1.67% returns so far are just barely over the average hedge fund returns for October, which were 1.5%, according to Bloomberg data.

From Bloomberg:

LibreMax Capital LLC’s fund gained about 1.67% in October.

“Returns were driven by the rally in the overall mortgage market as well as strong trading gains during the month,” the firm said in a letter to investors.

“While the press about foreclosure risks has been prevalent, the RMBS market has largely shrugged off these headlines.

"We agree with this sentiment and believe that current prices, broadly speaking, have already factored in the possibility of extended foreclosure timelines.”

It's no 7.7%, like Clive Capital returned last month, but the two funds are investing in totally different markets (Clive in commodities), and Lippmann invested in high yield corporate debt.

The fund lost money last month on hedges involving high- yield corporate debt, according to the letter.

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Why is the founder of hedge fund LibreMax, Greg Lippmann, smiling?

Because he had a great answer to the question, "Do you think the price broker-dealers charge is fair?" At Bloomberg TV's Hedge Fund conference today.

He answered: "I think the broker-dealers are giving you prices that they think are fair."

Everyone laughed and Lippmann broke into a smile.

Lippmann might also be happy about another thing. His hours are better now that he's left Deutsche Bank and is running his own firm.

He told Bloomberg Television:

Some people ask, well, isn't it much harder now that you're running your own firm? And I think the answer is, we're working harder but not longer, because we're focused on one thing and one thing only, and that's making money for investors.

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In the past year, it's seemed like there was a new hedge fund start-up to write about every day.

Turns out, we could have written about 2 launches per day; seven hundred and fifteen new funds launched in the first nine months of 2010 alone, according to Hedge Fund Research.

Hedge-fund start-ups last year "reached the highest level since the boom" according to the Wall Street Journal.

And the number is growing. Q3 saw the launch of 260 new hedge funds—up from 201 launches in Q2.

We won't bore you with the launches that don't have a good story behind them, so get ready to be amazed at 1) the number of high-level traders leaving their firms to become hedge fund entrepreneurs with tons of money under management already. And 2) the weird strategies that prove there's a hedge fund bubble right now.

Turiya Capital, April 2010

Fund name: Turiya Capital

Founder: Davide Erro (the former CEO of Gandhara Capital, he used to be the global portfolio manager of the global value group long/short equity fund at the DB advisors division of Deutsche Bank AG, where he managed a portfolio of €1.25 billion, and he also was the head of the Asia division at Goldman Sachs Equity Arbitrage.)

Trading: long/short global equity, specializing in Asian and European equities

Size of launch: $150 million 

Fun fact: Davide is the author of Resolving the Argentinean Paradox.

Source: Hedge Fund Intelligence and HFI

Waratah Advisors, July 2010

Fund name: Waratah Advisors

Founders: Blair Levinsky (from TD Securities), and Brad Dunkley (formerly at Gluskin Sheff + Associates, where he managed ~$1 billion)

Trading: long/short equity

Size of launch: $50 million

Fun fact: The pair named their firm after an Australian plant known for its resilience in intense conditions.

Source: National Post 

Libre Max Capital, September 2010

Fund name: Libre Max Capital

Founders: Greg Lippmann and Fred Brettschneider (both were hot shot traders at Deutsche Bank)

Trading: mortgages, high yield corporate debt

Size of launch: ~$375 million

Fun Fact: Check out Greg Lippmann's guide to sushi joints in NYC

Source: Business Insider

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Greg Lippmann, the former Deutsche Bank trader who brokered tons of shorts during the financial crisis, told the FCIC during an interview that he knows of at least 50 hedge funds that shorted the subprime market.

He brokered the trades for them at Deutsche.

Obviously the big winners were guys like John Paulson, Michael Burry, Phil Falcone, and Kyle Bass, but apparently many more people made at least some money off this trade, or at least knew how to hedge their bets. 

This might shed some light on why Goldman's Fabrice Tourre told his unit that the best customers to target for CDO sales were “buy and hold rating-based buyers” rather than “sophisticated hedge funds” that “will be on the same side of the trade as we will.”

For more coverage on what the FCIC's investigation into what caused the financial crisis uncovered, click here >

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The Senate Committee assigned to report on the causes of the financial crisis used then-trader Greg Lippmann's emails in their 650-page report as an example of the view within Deutsche Bank that the subprime market was collapsing.

The report was released today. Click here to download it.

The committee is trying to establish that banks knew the market was souring as early as 2005, yet inflated the bubble anyway. Senator Levin, who led the committee, believes that banks knew what was going on, and misled clients so they they could ultimately reap the profits (which they did).

Here are the examples the report uses from Lippmann's emails to show that bankers knowingly shorted the market while hawking the products to any dim-wits who would buy them. From the emails, a pattern emerges.

First he found "crap" that "blows":

• "This bond blows" (regarding a subprime RMBS security issued by Long Beach) - 2/24/2006
• "Yikes didn't see that. Half of these are crap and rest are ok... Crap-heat pchlt sail tmts." (The acronyms refer to "Home Equity Asset Trust""People's Choice Home Loan Securities Trust,""Structured Asset Investment Loan," and "Terwin Mortgage Trust.") - 4/5/2006
• "This is a good pool for you because it has a fair number of weak names but not so many that investors should balk (I wouldn't add more of these) and also has only a few names that are very good." (Advising Derek Kaufman at JPMorgan) - 6/23/2006
• "You can certainly build a portfolio by picking only bad names and you have largely done that as Rascahl is considered bad as is Fremont (bsabs fr, fhlt, jpmac fre, sabr fr, nheli fm deals) ace, arsi and lbmlt." (The acronyms refer to the names of lenders. Lippmann called "ACE,""bad" even though it was a Deutsche Bank-created asset.) - 8/4/2006
• "I was going to reject this [long purchase of a synthetic CDO] because it seems to be a pig CDO position dump 60^ but then I noticed winchester [DB affiliated hedge fund] is the portfolio selector..... any idea???" (Email to Michael Lamont and Richard D'Albert, DB's CDO Co-head and Global head of securitized products) - 8/4/2006
• "u have picked some crap right away so u have it figured out." (To Mark Lee at Contrarian Capital) - 12/4/2006

Then he shorted it, or "covered the short" by "duping""CDO fools" and told clients to do the same:

• "That said I can probably short this name to some CDO fool." (To Bradley Wickens at Spinnaker Capital) - 8/30/2006
• "This kind of stuff rarely trades in the synthetic market and will be tough for us to cover ie short to a CDO fool. that said if u gave us an order at 260 we would take it and try to dupe someone." (To Bradley Wickens at Spinnaker Capital) - 9/1/2006 

And there's more. 

• At times during 2006 and 2007, he referred to CDO underwriting by investment banks as the workings of a "CDO machine" or "ponzi scheme."
• “I don’t care what some trained seal bull market research person says this stuff has a real chance of massively blowing up.”

Eventually, the committee's report says, Deutsche Bank built a $5 billion short against the subprime market (Lippmann says he had to fight to get them to do it). A trader who worked for Deutsche Bank even wrote a song about it. It's called "CDO Oh Baby," and it's set to the Vanilla Ice song.

Lippmanns defense for "duping" and writing the above is this: He was "grasping at things" to prove he was right in his short position.

Because his trade was so successful, Lippmann doesn't work at Deutsche Bank anymore. He left to start a hedge fund, Libre Max, which launched in the fall.

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During the financial crisis, Deutsche Bank's Greg Lippmann and his bond traders (who built a $5 billion short on the subprime market) were negative on the subprime market while many people at the firm (and elsewhere on Wall Street) weren't.

Lippmann called those people "CDO fools" and he made profits for Deutsche Bank by "duping" the fools (into buying the CDOs that he shorted).

Part of Lippmann's defense for his actions is that he was "grasping at things" to prove his short position, but it wasn't like Lippmann wasn't the lone soldier on this. One of the men on Lippmann's desk, Rocky Kurita, agreed with Lippmann enough to write an entire song dedicated to the crappy CDO market.

Rocky Kurita, set CDO business to a song, “CDO Oh Baby,” by Vanilla Ice with the following lyrics:

Yo vip let’s kick it! CDO oh baby, CDO oh baby.

All right, stop, collaborate and listen.

Spreads are wide with a technical invasion.

Home Eq Subs were trading so tightly.

Until Hedge Funds Bot Protection daily and nightly.

Will they stop? Yo I don’t know. Turn up the Arb and let’s go.

To the extreme MacroFunds do damage like a vandal.

Now, BBs are trading with a new handle.

Print, even if the housing bubble looms.

There are never ends to real estate booms.

If there is a problem, yo, we’ll solve it.

Check out the spreads while my structurer revolves it.

CDO oh baby, CDO oh baby.

Sing it! It really works. 

Nice job, Rocky. Your polite and mild-mannered looks are delightfully misleading.

Kurita passed the song around in an email and Lippmann got it in a forward on 11/8/2005. 

Here's more on the lyricist:

38-year old Rocky Kurita (full name: Hiroki Michael Kurita) left Deutsche Bank in 2008 for DE Shaw, to form a new Asset Backed Securities group.

He's married to Sarah Gallant Kurita, a teacher, whom he met in college at Bucknell University. 

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The DOJ is suing Deutsche Bank for $1 billion.

The suit will be a “civil mortgage fraud lawsuit.”

It sounds like what happened is, Deutsche Bank was one of the firms that selected mortgages that would be insured by the government.

The government says DB "repeatedly lied" in order to be in the strategic position.

What being an endorser meant for Deutsche is that it could generate tons of mortgages and then profit from re-selling them. The firm ended up endorsing over 39,000 mortgages with principal totaling more than $5 billion, according to the complaint.

Once the mortgages were DB-endorsed, they were backed by the government. But unfortunately for the government, the mortgages did not deserve the DB endorsement -- because rather than perform due diligence to ensure that mortgages could be paid by borrowers before endorsing them, DB put their stamp of approval on the documents "in blatant disregard" of whether or not borrowers could pay, according to the complaint. 

The firm had a profit incentive to do this, says the complaint, because they made money off of re-selling the mortgages.

The government seeks $1 billion damages and penalties for violations of the federal False Claims Act.

Basically, this is another lawsuit that suggests that Wall Street firms' carelessness caused the housing crisis.

Reuters sums it up:

Accusing the German bank and its Mortgage IT Inc unit of repeatedly lying to be included in a federal program to select mortgages to be insured by the government.

In the civil complaint, the government said that defendants recklessly chose mortgages that violated program rules "in blatant disregard" of whether borrowers could make mortgage payments.

Deutsche Bank and MortgageIT profited from the resale of the mortgages, even as thousands of U.S. homeowners faced default and eviction, the complaint said.

At 1 pm, there will be a press meeting with more information. 

From the WSJ:

According to a press release issued by the U.S. attorney’s office in Manhattan, the Justice Department will sue Deutsche Bank and its subsidiary Mortgage IT for “years of reckless lending practices.”

We're not really surprised because after last month, when the Senate committee released tons of internal documents from Deutsche Bank during the crisis, it was clear that DB had a $5 billion short against the mortgage market.

And, that they built it using questionable means similar to Goldman Sachs, by duping "CDO fools." 

A trader under Greg Lippmann, the trader largely responsible for creating the short, might even become the new Fabrice Tourre. He wrote a song about the CDO market using Vanilla Ice's "Ice Ice Baby."

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It's well-known that former Deutsche Bank CDO wunderkind Greg Lippmann, who's now working for Fred Brettschneider's new hedge fund Libre Max, is a sushi freak.

Seriously. Lippmann loves his sushi and demands only the finest here in New York; so much so that for years he's been compiling a famous excel spreadsheet of the city's fine raw fish-eating establishments.

The best part of his spreadsheet is that Lippman includes minute details about where to sit, who to talk to and his favorite things about the place.

We're not going to bother with the bottom of the list at the moment - we want to revisit the top dogs.

(Note: The list we acquired was last updated in August of 2008 - h/t to @colinjnagy for pointing this out to us)

First a quick guide to understanding Lippmann's lingo:

Lippmann has codes for what neighborhood each restaurant is in. Here's how it works:

Downtown East = 1
Downtown West = 2  
Midtown East = 3
Midtown West = 4
Uptown East = 5
Uptown West = 6

He also uses code for the amount of times he's frequented a particular place. Here's how that works:

F = He went 1-5 times
S = He went 5-10 times
M = More than 10 times

20. Matsuri

Address: 16th and 9th
Reservations: Yes
Frequency: M
Last Time: '05 Spring
Neighborhood: 2
Notes: "Trendy and Tasty. Reasonably priced."

19. Hedeh

Address: Great Jones / Bowery
Reservations: Yes
Frequency: F
Last Time: '06 Summer
Neighborhood: 1
Notes: "Definitely worth checking out."

Last week, we told you all about Greg Lippmann's special sushi spreadsheet that has over 100 New York City sushi restaurants on it rated in a methodical fashion.

We detailed the top 20 places and showed you how to read Lippmann's cryptic lingo. For example, a frequency of "M" designates that Lippmann had frequented an establishment more than 10 times.

This time we're back with the worst places you can get sushi in NYC. Stay away from these places unless you have an iron-lined stomach.

Again, a quick guide to understanding Lippmann's lingo:

Lippmann has codes for what neighborhood each restaurant is in. Here's how it works:

Downtown East = 1
Downtown West = 2  
Midtown East = 3
Midtown West = 4
Uptown East = 5
Uptown West = 6

He also uses code for the amount of times he's frequented a particular place. Here's how that works:

F = He went 1-5 times
S = He went 5-10 times
M = More than 10 times

20. Ten Kai

Address: 56th between 5th and 6th
Reservations: Yes
Frequency: F
Last Time: '01 Fall
Neighborhood: 4
Notes: "Quiet, affordable."

19. Choshi

Address: Irving Place
Reservations: Yes
Frequency: S
Last Time: '00 Winter
Neighborhood: 1
Notes: "Decent, shorter lines than Yama but right nearby."

First the important details about Greg Lippman's new fund, Libre Max.

Lippman and his partner, Fred Brettschneider, have assembled their team (a number of Deutsche Bank traders have left the firm in the past few months to join the start-up hedge fund), and they are now making pitches to investors for Libre Max. But so far, they have not brought in any money.

From the Observer's profile of Lippman:

"We've been received warmly. Time will tell whether that means that money is coming in or not," Mr. Lippmann said. "People have been happy to meet us. They've said, 'We've enjoyed your presentation, you guys seem like you've got a good idea.' But it's free to say that."

One possible reason? They're some of the few bulls out there right now.

According to a source who saw Lippman's pitch for Libre Max and told the Observer about it, Lippman doesn't have the next "big short," but he's confident there's money to be made out there.

"I am cautious and I can make my way through the jungle and pick securities that are going to do well," Lippman says.

Another possibility? Let's talk about the funny-sounding name. It sounds like the punchline to a joke or the name of a band.

Here's what it means, according to the Wall Street Journal:

The Libre Max name is meant to suggest "open ideas" relating to investment opportunities, a person familiar with the matter said. "Libre" also incorporates the first two letters of Mr. Lippmann's name as well as Fred Brettschneider's, who has been Deutsche's head of global markets for the Americas but is joining him. "Max" incorporates the last names of the other two founders.

The incorporation of names is a decent explanation. That's pretty much what every hedge fund manager does - make their fund their initials or last name or something. But here's another idea.

We know Lippman likes t-shirts (he handed out "I'm short your house!" t-shirts a few years ago). Then he names his fund Libre Max, which happens to, in our imagination at least, look fantastic on a t-shirt. Just putting that out there because we can't take the name seriously.

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One of the few guys who predicted the subprime crisis and bet that the bubble would pop, Greg Lippman, is struggling to perform well this year at his new hedge fund literally just launched his hedge fund (in October), and we were a little harsh.

His fund manages ~$400 million, it's just out the gate, and it's up 1.67%. 

That's pretty cool, especially considering that tons of hedge fund managers are just giving up in this environment because (it seems) they can't find enough to invest in.

To put LibreMax's returns in context, Lippmann's fund, LibreMax's, 1.67% returns so far are just barely over the average hedge fund returns for October, which were 1.5%, according to Bloomberg data.

From Bloomberg:

LibreMax Capital LLC’s fund gained about 1.67% in October.

“Returns were driven by the rally in the overall mortgage market as well as strong trading gains during the month,” the firm said in a letter to investors.

“While the press about foreclosure risks has been prevalent, the RMBS market has largely shrugged off these headlines.

"We agree with this sentiment and believe that current prices, broadly speaking, have already factored in the possibility of extended foreclosure timelines.”

It's no 7.7%, like Clive Capital returned last month, but the two funds are investing in totally different markets (Clive in commodities), and Lippmann invested in high yield corporate debt.

The fund lost money last month on hedges involving high- yield corporate debt, according to the letter.

Join the conversation about this story »

Why is the founder of hedge fund LibreMax, Greg Lippmann, smiling?

Because he had a great answer to the question, "Do you think the price broker-dealers charge is fair?" At Bloomberg TV's Hedge Fund conference today.

He answered: "I think the broker-dealers are giving you prices that they think are fair."

Everyone laughed and Lippmann broke into a smile.

Lippmann might also be happy about another thing. His hours are better now that he's left Deutsche Bank and is running his own firm.

He told Bloomberg Television:

Some people ask, well, isn't it much harder now that you're running your own firm? And I think the answer is, we're working harder but not longer, because we're focused on one thing and one thing only, and that's making money for investors.

Join the conversation about this story »

In the past year, it's seemed like there was a new hedge fund start-up to write about every day.

Turns out, we could have written about 2 launches per day; seven hundred and fifteen new funds launched in the first nine months of 2010 alone, according to Hedge Fund Research.

Hedge-fund start-ups last year "reached the highest level since the boom" according to the Wall Street Journal.

And the number is growing. Q3 saw the launch of 260 new hedge funds—up from 201 launches in Q2.

We won't bore you with the launches that don't have a good story behind them, so get ready to be amazed at 1) the number of high-level traders leaving their firms to become hedge fund entrepreneurs with tons of money under management already. And 2) the weird strategies that prove there's a hedge fund bubble right now.

Turiya Capital, April 2010

Fund name: Turiya Capital

Founder: Davide Erro (the former CEO of Gandhara Capital, he used to be the global portfolio manager of the global value group long/short equity fund at the DB advisors division of Deutsche Bank AG, where he managed a portfolio of €1.25 billion, and he also was the head of the Asia division at Goldman Sachs Equity Arbitrage.)

Trading: long/short global equity, specializing in Asian and European equities

Size of launch: $150 million 

Fun fact: Davide is the author of Resolving the Argentinean Paradox.

Source: Hedge Fund Intelligence and HFI

Waratah Advisors, July 2010

Fund name: Waratah Advisors

Founders: Blair Levinsky (from TD Securities), and Brad Dunkley (formerly at Gluskin Sheff + Associates, where he managed ~$1 billion)

Trading: long/short equity

Size of launch: $50 million

Fun fact: The pair named their firm after an Australian plant known for its resilience in intense conditions.

Source: National Post 

Libre Max Capital, September 2010

Fund name: Libre Max Capital

Founders: Greg Lippmann and Fred Brettschneider (both were hot shot traders at Deutsche Bank)

Trading: mortgages, high yield corporate debt

Size of launch: ~$375 million

Fun Fact: Check out Greg Lippmann's guide to sushi joints in NYC

Source: Business Insider

Greg Lippmann, the former Deutsche Bank trader who brokered tons of shorts during the financial crisis, told the FCIC during an interview that he knows of at least 50 hedge funds that shorted the subprime market.

He brokered the trades for them at Deutsche.

Obviously the big winners were guys like John Paulson, Michael Burry, Phil Falcone, and Kyle Bass, but apparently many more people made at least some money off this trade, or at least knew how to hedge their bets. 

This might shed some light on why Goldman's Fabrice Tourre told his unit that the best customers to target for CDO sales were “buy and hold rating-based buyers” rather than “sophisticated hedge funds” that “will be on the same side of the trade as we will.”

For more coverage on what the FCIC's investigation into what caused the financial crisis uncovered, click here >

Join the conversation about this story »

The Senate Committee assigned to report on the causes of the financial crisis used then-trader Greg Lippmann's emails in their 650-page report as an example of the view within Deutsche Bank that the subprime market was collapsing.

The report was released today. Click here to download it.

The committee is trying to establish that banks knew the market was souring as early as 2005, yet inflated the bubble anyway. Senator Levin, who led the committee, believes that banks knew what was going on, and misled clients so they they could ultimately reap the profits (which they did).

Here are the examples the report uses from Lippmann's emails to show that bankers knowingly shorted the market while hawking the products to any dim-wits who would buy them. From the emails, a pattern emerges.

First he found "crap" that "blows":

• "This bond blows" (regarding a subprime RMBS security issued by Long Beach) - 2/24/2006
• "Yikes didn't see that. Half of these are crap and rest are ok... Crap-heat pchlt sail tmts." (The acronyms refer to "Home Equity Asset Trust""People's Choice Home Loan Securities Trust,""Structured Asset Investment Loan," and "Terwin Mortgage Trust.") - 4/5/2006
• "This is a good pool for you because it has a fair number of weak names but not so many that investors should balk (I wouldn't add more of these) and also has only a few names that are very good." (Advising Derek Kaufman at JPMorgan) - 6/23/2006
• "You can certainly build a portfolio by picking only bad names and you have largely done that as Rascahl is considered bad as is Fremont (bsabs fr, fhlt, jpmac fre, sabr fr, nheli fm deals) ace, arsi and lbmlt." (The acronyms refer to the names of lenders. Lippmann called "ACE,""bad" even though it was a Deutsche Bank-created asset.) - 8/4/2006
• "I was going to reject this [long purchase of a synthetic CDO] because it seems to be a pig CDO position dump 60^ but then I noticed winchester [DB affiliated hedge fund] is the portfolio selector..... any idea???" (Email to Michael Lamont and Richard D'Albert, DB's CDO Co-head and Global head of securitized products) - 8/4/2006
• "u have picked some crap right away so u have it figured out." (To Mark Lee at Contrarian Capital) - 12/4/2006

Then he shorted it, or "covered the short" by "duping""CDO fools" and told clients to do the same:

• "That said I can probably short this name to some CDO fool." (To Bradley Wickens at Spinnaker Capital) - 8/30/2006
• "This kind of stuff rarely trades in the synthetic market and will be tough for us to cover ie short to a CDO fool. that said if u gave us an order at 260 we would take it and try to dupe someone." (To Bradley Wickens at Spinnaker Capital) - 9/1/2006 

And there's more. 

• At times during 2006 and 2007, he referred to CDO underwriting by investment banks as the workings of a "CDO machine" or "ponzi scheme."
• “I don’t care what some trained seal bull market research person says this stuff has a real chance of massively blowing up.”

Eventually, the committee's report says, Deutsche Bank built a $5 billion short against the subprime market (Lippmann says he had to fight to get them to do it). A trader who worked for Deutsche Bank even wrote a song about it. It's called "CDO Oh Baby," and it's set to the Vanilla Ice song.

Lippmanns defense for "duping" and writing the above is this: He was "grasping at things" to prove he was right in his short position.

Because his trade was so successful, Lippmann doesn't work at Deutsche Bank anymore. He left to start a hedge fund, Libre Max, which launched in the fall.

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During the financial crisis, Deutsche Bank's Greg Lippmann and his bond traders (who built a $5 billion short on the subprime market) were negative on the subprime market while many people at the firm (and elsewhere on Wall Street) weren't.

Lippmann called those people "CDO fools" and he made profits for Deutsche Bank by "duping" the fools (into buying the CDOs that he shorted).

Part of Lippmann's defense for his actions is that he was "grasping at things" to prove his short position, but it wasn't like Lippmann wasn't the lone soldier on this. One of the men on Lippmann's desk, Rocky Kurita, agreed with Lippmann enough to write an entire song dedicated to the crappy CDO market.

Rocky Kurita, set CDO business to a song, “CDO Oh Baby,” by Vanilla Ice with the following lyrics:

Yo vip let’s kick it! CDO oh baby, CDO oh baby.

All right, stop, collaborate and listen.

Spreads are wide with a technical invasion.

Home Eq Subs were trading so tightly.

Until Hedge Funds Bot Protection daily and nightly.

Will they stop? Yo I don’t know. Turn up the Arb and let’s go.

To the extreme MacroFunds do damage like a vandal.

Now, BBs are trading with a new handle.

Print, even if the housing bubble looms.

There are never ends to real estate booms.

If there is a problem, yo, we’ll solve it.

Check out the spreads while my structurer revolves it.

CDO oh baby, CDO oh baby.

Sing it! It really works. 

Nice job, Rocky. Your polite and mild-mannered looks are delightfully misleading.

Kurita passed the song around in an email and Lippmann got it in a forward on 11/8/2005. 

Here's more on the lyricist:

38-year old Rocky Kurita (full name: Hiroki Michael Kurita) left Deutsche Bank in 2008 for DE Shaw, to form a new Asset Backed Securities group.

He's married to Sarah Gallant Kurita, a teacher, whom he met in college at Bucknell University. 

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The DOJ is suing Deutsche Bank for $1 billion.

The suit will be a “civil mortgage fraud lawsuit.”

It sounds like what happened is, Deutsche Bank was one of the firms that selected mortgages that would be insured by the government.

The government says DB "repeatedly lied" in order to be in the strategic position.

What being an endorser meant for Deutsche is that it could generate tons of mortgages and then profit from re-selling them. The firm ended up endorsing over 39,000 mortgages with principal totaling more than $5 billion, according to the complaint.

Once the mortgages were DB-endorsed, they were backed by the government. But unfortunately for the government, the mortgages did not deserve the DB endorsement -- because rather than perform due diligence to ensure that mortgages could be paid by borrowers before endorsing them, DB put their stamp of approval on the documents "in blatant disregard" of whether or not borrowers could pay, according to the complaint. 

The firm had a profit incentive to do this, says the complaint, because they made money off of re-selling the mortgages.

The government seeks $1 billion damages and penalties for violations of the federal False Claims Act.

Basically, this is another lawsuit that suggests that Wall Street firms' carelessness caused the housing crisis.

Reuters sums it up:

Accusing the German bank and its Mortgage IT Inc unit of repeatedly lying to be included in a federal program to select mortgages to be insured by the government.

In the civil complaint, the government said that defendants recklessly chose mortgages that violated program rules "in blatant disregard" of whether borrowers could make mortgage payments.

Deutsche Bank and MortgageIT profited from the resale of the mortgages, even as thousands of U.S. homeowners faced default and eviction, the complaint said.

At 1 pm, there will be a press meeting with more information. 

From the WSJ:

According to a press release issued by the U.S. attorney’s office in Manhattan, the Justice Department will sue Deutsche Bank and its subsidiary Mortgage IT for “years of reckless lending practices.”

We're not really surprised because after last month, when the Senate committee released tons of internal documents from Deutsche Bank during the crisis, it was clear that DB had a $5 billion short against the mortgage market.

And, that they built it using questionable means similar to Goldman Sachs, by duping "CDO fools." 

A trader under Greg Lippmann, the trader largely responsible for creating the short, might even become the new Fabrice Tourre. He wrote a song about the CDO market using Vanilla Ice's "Ice Ice Baby."

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