Associated Press | The government has accused Goldman Sachs & Co. of defrauding The Securities and Exchange Commission said in a civil complaint Friday Two European banks that bought the mortgage securities lost nearly $1 The government has accused Goldman Sachs & Co. of defrauding The charges come as lawmakers seek to crack down on Wall Street practices that helped cause the financial crisis. Among proposals Congress is weighing are tougher rules for complex investments like those involved in the alleged Goldman fraud. The Goldman client implicated in the fraud is one of the world’s largest hedge funds, Paulson & Co. The SEC said it paid Goldman roughly $15 million in 2007 to put together an investment offering that was tied to mortgage-related securities the hedge fund viewed as likely to decline in value. Separately, Paulson took out a form of insurance that allowed it to make a huge profit when those securities became nearly worthless. ABN Amro, a major Dutch bank, was the biggest loser in the securities, having paid Goldman $841 million, according to the SEC. And IKB, a German commercial bank, lost nearly all its $150 million investment, the agency said. Most of the money they lost went to Paulson in a series of transactions between Goldman and the hedge fund, the SEC said. Goldman Sachs shares fell more than 13 percent after the SEC announcement, which also caused shares of other financial companies to sink. The Dow Jones industrial average fell more than 120 points in midday trading. 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. The SEC’s enforcement chief said the agency is investigating a broad range of practices related to the crisis. The agency also charged a Goldman vice president, Fabrice Tourre, 31, who it said was principally responsible for devising the deal and marketing the securities. The SEC said he now is executive director of Goldman Sachs International in London. Tourre, the SEC said, boasted to a friend that he was able to put such deals together as the mortgage market was unraveling in early 2007. In an email to a friend, he described himself as “the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!” The SEC is seeking unspecified fines and restitution from Goldman Sachs and Tourre. Asked why the SEC did not also pursue a case against Paulson, Enforcement Director Robert Khuzami said: “It was Goldman that made the representations to investors. Paulson did not.” Paulson & Co. is run by John Paulson, who reaped billions by betting against subprime mortgage securities. He is not related to former Treasury Secretary Henry Paulson. Goldman told investors that a third party, ACA Management LLC, had selected the pools of subprime mortgages it used to create what are known as synthetic collateralized debt obligations. But, the SEC alleges, Goldman misled investors by failing to disclose that Paulson & Co. also played a role in selecting the mortgage pools and stood to profit from their decline in value. “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,” Khuzami said in a statement. The SEC charges come after Goldman Sachs denied last week it bet against clients by selling them mortgage-backed securities while reducing its own exposure to them. In an annual letter to shareholders, Goldman said it began reducing its exposure to the U.S. mortgage market in late 2006. It said it did so by selling mortgage investments or buying credit default swaps. The swaps are a form of insurance that pays out if the value of the underlying asset declines. Those hedges, also known as short positions, served Goldman well. As the housing market began cratering and losses piled up for other big banks, Goldman suffered less damage. That led to criticism that the bank benefited at the expense of clients who bought mortgage-backed securities that became toxic. Goldman denied that. “Our short positions were not a bet against our clients,”‘ Goldman said in the letter. “Rather, they served to offset our long positions. Our goal was, and is, to be in a position to make markets for our clients while managing our risk within prescribed limits.” In the letter, Goldman also rejected claims that it profited from the mortgage market meltdown.
Lloyd C. Blankfein, chairman and CEO of Goldman Sachs, testifies before the Financial Crisis Inquiry Commission on January 13, 2010 in Washington, DC. (Olivier Douliery /Abaca Press/MCT)
investors by failing to disclose conflicts of interest in subprime
investments it sold as the housing market was collapsing.
that Goldman failed to disclose that one of its clients helped create
– and then bet against — subprime mortgage securities that Goldman
sold to other investors.
billion, the SEC said. The agency is seeking to recoup profits reaped
on the deal
investors by failing to disclose conflicts of interest in mortgage
investments it sold as the housing market was faltering.
Goldman Sachs denied the allegations. In a statement, it called the SEC’s charges “completely unfounded in law and fact” and said it will contest them.
SEC accuses Goldman Sachs of fraud
Posted April 16, 2010 at 1:10 p.m.
Take them all out baqck and hang them!!! They have caused so much destruction it’s not even funny.
Why is this a civil case rather than a criminal prosecution? We will send a poor person to prison for smoking crack, then let rich people who created the economic problems of the housing market (which has destroyed the lives of countless people) off the hook. If Goldman Sachs is responsible for this fraud, they should be put out of business. Our government officials, however, not only give them a pass but also loan them whatever money they need when they get into trouble. The reckless pursuit of profit by Goldman Sachs (that caused these problems) needs to be punished, and the company liquidated as an example to others.
There goes Obama’s #1 source of corporate funding.
Have AG Holder file criminal charges and treat them all the same way he treated Marc Rich….
The reason it is Civil and not criminal is because too many people, politicians etc… had their hands in it to.
And all along we were being told (by Blankfein himself) that Goldman was merely doing God’s work . . . and deserved to be richly compensated for worshipping at His alter. Ahh, but the Devil must have been hiding the details of Goldman’s defrauding and duplicity.
Where does it say civil and not criminal?
http://www.rollingstone.com/politics/story/28816321/inside_the_great_american_bubble_machine
just remember, the u.s. gov’t sent a father of 4 little boys to jail for pulling a hoax with a balloon and the republicans do not think there should be any regulation on these crooks. it is amazing how ethically challenged these b-school grads are who are pretty much enablers to the robber barons of this country – everybody knows these idiot only risk other people’s capital vs their own
What did you people expect? The founding fathers gave us the right, no…the obligation, to rid ourselves of tyranny. But most of you preferred to watch TV rather than pay attention to the very real problems that were right before your eyes. For decades our government has been spending like a drunken sailor. Over the years more and more of you have become dependent on that irresponsible spending so you turned a blind eye to the dishonesty and incompetence of your elected leaders and their appointed minions, just so long as you got your check, your grant, your handout. Well now the cupboard is bare and the empty promises for which you sold your country down the river have been exposed as lies and you wonder how you are going to put food on the table?!? Most of you deserve to be homeless and hungry because you are little more than scavengers devouring the remains of a once great nation.
Wasn’t it George W Bush who named the head of Goldman to be Secretary of the Treasury?
This why the CEO and staff were given big pay and bonus money. What will they do about it? I think nothing but another bonus because where else can you get this knowlegable help unless you pay them a lot.
Now, Mr. Biden, this is a big f-ing deal. And for Mr. Blanfein, sometimes saying sorry just ain’t enough.
http://www.bloomberg.com/apps/news?pid=20601103&sid=aeV9jwqKKrEw
The Obama haters do not want the truth, Bush and the boys did a real trip on all of the USA. Then there was greed by many and many thinking they should own a piece of the pie when their funds did not reflect those type purchases and on and on and on.
Then the realm of political hacks thwat we cannot sweep out of office because there is the same waiting in the wings. They are all cut out of the same cloth!
Know what’s funny? The fact that the teabaggers are idiotically screaming against more regulation, when stuff like this is the direct result of the elimination of regulations.
They say they want the “old” America back. Well, the “old” America had MORE regulation.
So which is it, teabaggers?
This is huge.
The teabaggers are screaming about paying too many taxes while thievery has run rampant over the bush years. Teabaggers are a puppet organization as talked about in the memos that were found this week. Meanwhile the shenanigans w/o enough regulations on wall street are running a muck over our treasury.
In one sense, this deal was incomprehensible. In another sense, it was extremely straightforward: if you deal with GS, you’re gonna get the shaft. You just won’t be able to figure out how until it happens, if then; you won’t ever be able to prove it in court; and if you do, you won’t be able to recover anything.
Frank Watson | April 16, 2010 12:11 PM | Reply
Wasn’t it George W Bush who named the head of Goldman to be Secretary of the Treasury?
~~~~~~
thats right, and the same former head of Sachs O’ Gold Henry Paulson who refused to disclose which banks received bailout mony and credit extensions. Despite a recent federal court ruling, they still refuse to comply, now taking their *arguement* to the SCOTUS for a little judge shopping.
Keep in mind that under the Bush administration, Hank Paulson gave authority to the federal reserve to run America’s finances, IMHO a completely questionable and probably unconstitutional act:
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2rzjENZQV5k
According to the revisionist teabaggers, all of our problems began the day Obama won the general election.
Denial can be a powerful tool.
About time.
Actually there is much more to this that many don’t know about…. The problem isn’t only Goldman Sachs & Co it involves other financial institutions as they are actively pursuing a White House Coup similar to what was tried back in 1933. What most of us see is what is obvious but there are many other activities that we don’t see that are part of this. The banks were also involved in setting up an illigitment IRS system back in 1913 which follows along similar lines with how they are operating today with brute force. The financial groups have an army of operatives that pursue anyone who stands in their way. They are well entrenched within the legal area to get anything they want through corruption methods.
The financial areas are financing this White House Coup using the a criminal element within the CIA to smuggle hugh volume drug shipments into the US to sell to our people. The proceeds are used to fund the army of black ops in support of the WH Coup. How I know is because I was in a family for more than 26 years who are directly involved in supporting the Coup.
Marty Didier
Northbrook,IL
waa waaa its all **** Cheney and George Bushes fault! waaa waaa rich republican are evil…w aaa waaa
There is more to add to my comment above…. If you don’t believe what I’m telling you, go ask my three children now adults and they will verify what I said above. It may be important to consider why this hasn’t surfaced before. Our Justice area is thoroughly bought out and corrupt at the top. There are many good people within the justice area but they are strangled with being able to do what is right. WE all have witnessed how corrupt and bought out our Politicians are but we need to realize that it doesn’t stop there. How far this goes depends upon how clean our justice department is.
Go ahead and talk to my adult children and learn that I’m telling the truth.
Marty Didier
Nortbhrook, IL
And let’s not forget what started this economic mess: The actions of AIG, Fannie Mae and Freddie Mac and the politicians who protected them Who were those politicians? Chris Dodd (D-CT), Barney Frank (D-MS) and President LIAR (Obama when he was senator liar democrat from IL).
Why did they protect these companies? Easy, they were the biggest three recipients of campaign funds from them. Bush, McCain and other repubs wanted these companies investigate but were stonewalled by these three, especially Dodd and Frank who lead the congressional committees responsible for oversight.
Complicating the situation was that the top three people at Fannie were former Clinton administration people — one of whome Obama wanted to lead his campaign before all this surfaced. These three people admittedly cooked the financial books so that they could make their collectvie bonuses of about $200,000,000 over a few years. Also involved and making many millions — >$10,000,000 — was Rahm “Twinkle Toes” Emanauel.
On top of all of this was the faxct that Barney was having an affair with a male exectuive at AIG while in charge of the oversight committee. Think there was any “pillol talk” going on?
It is time to clean out the House and the Senate. It will happen this November when the country is saved from the socialists and marxists and the den of thieves running loose in congress.
I think all of the high priced legal talent that helped them destroy the economy should be prosecuted as well.
The heat must be on for Obama with Blago’s trial starting soon prompting him to create a diversion to his crooked dealings with Tony Rezko and company. Ain’t politics fun?
The reason the charges are civil and not criminal, is that the SEC does not have the authority to pursue criminal charges. That decision rests with the Dept of Justice, which is investigating the matter, but requires a higher burden of proof.
And, yes, this is huge. Goldman Sachs thoroughly owned and owns the financial policy making apparatus of both the GWB and Obama admins. That Obama is allowing this, is, quite frankly, shocking. I only hope it is not merely for show. Unfortunately, my gut tells me that this is part of some power play to get GS to buy into some weak reform.
This is the same company that played around with oil futures contracts which jacked our gasoline prices up past $4 a gallon.
They are the vampire squid of our economic system. The sooner they are closed down, the better for all of us.
“The actions of AIG, Fannie Mae and Freddie Mac… ”
a) AIG insured the disaster, they weren’t responsible for creating it, nor did they profit from it. They were bailed out (by the GWB admin) in order to protect GS.
b) And as for FMae and FMac, you’re thoroughly confused. GWB could have “investigated” them at any point, without any congressional interference, during the yrs the GOP controlled congress. But he didn’t. Ooops.
c) All you gibbering partisans need to understand NOW that Wall St largely owns both parties. Also understand that while the Dems are offering largely weak reg reform, that the GOP has taken the position of opposing all reform that would prevent another melt-down.
I was walking down La Salle street today and a bunch of fat cats in expensive suits and shoes came out of the Northern Trust building looking all impressed with themselves, and it was all I could do to not spit at them.
Actually Marty I can believe every word you say. Just got done reading “Rule by Secrecy” by Jim Marrs – talks about the money changers (bankers) that have created this mess. Goes all the way back to the Rothschilds – the bankers are probably responsible for every war going back to 1812. The Federal Reserve is nothing more than a scheme to bankrupt us all and bring us under control of the money changers. Ron Paul is right – audit the Fed! This is just the tip of the iceberg.
Regulation? Let’s start with the founders. James Madison, writing in Federalist 51 said “… But what is government itself but the greatest of all reflections on human nature? If men were angels, no government would be necessary.”
Where did this all start? Phil Gramm’s 1999 Banking Modernization Act which took down Glass Steigel … banking regulations erected during the Republican Depression which worked very well for 75 years.
Didn’t Santayana say something about the failure of remembering history dooms us to repeat it?
And now the GOP plans to block new bank regulations? The GOP will deserve the electoral result come November.