Government Brings Fraud Charges Against Goldman Sachs

Goldman_SachsFinally! Despite the cozy relationship between the Obama administration’s financial team of Geithner, Summers, et al with their brethren on Wall Street, the SEC reveals that it has the balls to go up against Goldman Sachs. I fear for the job security of senior SEC staffers, but meanwhile they are hurting Goldman where it counts – the firm’s stock price dropped 10% on the announcement, as reported by NPR:

The government has accused Goldman Sachs & Co. of defrauding investors by failing to disclose conflicts of interest in mortgage investments it sold as the housing market was faltering.

The Securities and Exchange Commission announced Friday civil fraud charges against the Wall Street powerhouse and one of its vice presidents. The agency alleges Goldman failed to disclose that one of its clients helped create — and then bet against — subprime mortgage securities that Goldman sold to investors.

Investors in the mortgage securities are alleged to have lost more than $1 billion, the SEC noted.

“The product was new and complex but the deception and conflicts are old and simple,” Robert Khuzami, the SEC’s director enforcement, said in a statement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

Read The Charges

The Goldman client implicated in the fraud is one of the world’s largest hedge funds, Paulson & Co., which paid Goldman roughly $15 million for structuring the deals in 2007.

Goldman Sachs shares fell more than 10 percent after the SEC announcement.

The civil lawsuit filed by the SEC in federal court in Manhattan was the government’s most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession…

[continues at NPR]

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  • radiac

    Go get 'em!

  • mcgibbo

    Government brings fraud charges *chuckle* isn't that like the pot calling the kettle black as we say in Blighty

  • tonyviner

    I hope they all die. Every last one of them.

  • Dave

    I'm not impressed or assuaged in the least. CIVIL FRAUD charges?! After the fraud and naked theft?

  • Anonymous

    About bloody time.

    And now Die Welt am Sonntag is reporting that German regulators want to be paged in on the SEC filing in case their regulators decide to have a go at Goldman for their part in damaging the IKB Deutsche Industriebank, which the German public had to bail out as well.

    This nonsense is so obscene its effects extended well beyond our shores. A big part of the reason why Spain has increased unemployment is because the banks were getting people to buy summer homes they couldn’t afford in that country, and now that the bottom has dropped out, Spanish construction firms and all the attending employees are unemployed, thanks to upside down mortgages just like here in America.

    Financial regulation is HUGELY important. These RATIONAL regs must be restored if we’re to have any security return.

    From the time of the Depression until the 1980’s we had no similar giant crashes. Minor economic corrections yes. Crashes, no. But as soon as Reagan deregulated, you got the Savings and Loan debacle that McCain and the Bush family were up to their respective necks in, then Enron accounting, then more deregulation thanks to midnight legislating without consent of the rest of Congress by Phil Gramm, and “Voila!” you get BS like our present crisis.

    Republicans (and the wussified pseudo-Democrats who support them – ie all corporatists no matter their political party) who oppose common sense legislation to get things back on track, do so at their own career peril.

    Start with civil fraud charges, then bring on the criminal charges. They should be thankful the American people haven’t borrowed the guillotine from the French and given them a close shave.

    Reminds me of Lewis Black’s bit where he goes, “You know, I never really understood the anger of the French and how they could put the royals to the guillotine, but now I get it! The greediest of the greedy saw these people and just thought, ‘Now THAT’s fuckin’ greedy.’ They just made shit up! They just made the numbers up!”

    And he was only talking about Enron, Worldcom, Arthur Anderson, Adelphia, etc. Goldman Sachs puts Enron and Co. to shame in terms of how much they ripped people off.

    Goldman belongs on a whole other circle of hell.

  • 5by5

    About bloody time.

    And now Die Welt am Sonntag is reporting that German regulators want to be paged in on the SEC filing in case their regulators decide to have a go at Goldman for their part in damaging the IKB Deutsche Industriebank, which the German public had to bail out as well.

    This nonsense is so obscene its effects extended well beyond our shores. A big part of the reason why Spain has increased unemployment is because the banks were getting people to buy summer homes they couldn't afford in that country, and now that the bottom has dropped out, Spanish construction firms and all the attending employees are unemployed, thanks to upside down mortgages just like here in America.

    Financial regulation is HUGELY important. These RATIONAL regs must be restored if we're to have any security return.

    From the time of the Depression until the 1980's we had no similar giant crashes. Minor economic corrections yes. Crashes, no. But as soon as Reagan deregulated, you got the Savings and Loan debacle that McCain and the Bush family were up to their respective necks in, then Enron accounting, then more deregulation thanks to midnight legislating without consent of the rest of Congress by Phil Gramm, and “Voila!” you get BS like our present crisis.

    Republicans (and the wussified pseudo-Democrats who support them – ie all corporatists no matter their political party) who oppose common sense legislation to get things back on track, do so at their own career peril.

    Start with civil fraud charges, then bring on the criminal charges. They should be thankful the American people haven't borrowed the guillotine from the French and given them a close shave.

    Reminds me of Lewis Black's bit where he goes, “You know, I never really understood the anger of the French and how they could put the royals to the guillotine, but now I get it! The greediest of the greedy saw these people and just thought, 'Now THAT's fuckin' greedy.' They just made shit up! They just made the numbers up!”

    And he was only talking about Enron, Worldcom, Arthur Anderson, Adelphia, etc. Goldman Sachs puts Enron and Co. to shame in terms of how much they ripped people off.

    Goldman belongs on a whole other circle of hell.

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