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Goldman Sachs sued - another hit to US economy?
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| StereoPrincess |
| quote: |
(Reuters) - Goldman Sachs Group Inc was charged with fraud on Friday by U.S. securities regulators in the structuring and marketing of a debt product tied to subprime mortgages.
U.S.
The Securities and Exchange Commission lawsuit alleges that Paulson & Co, a major hedge fund run by the billionaire John Paulson, worked with Goldman in creating the collateralized debt obligation, and stood to benefit as its value fell, costing investors more than $1 billion.
Fabrice Tourre, a Goldman vice president who the SEC said was principally responsible for creating the product, was also charged with fraud.
Paulson has not been charged. "Goldman made the representations here to the investors, Paulson did not," SEC enforcement chief Robert Khuzami said on a conference call.
Spokesmen for Goldman and Paulson had no immediate comment. Tourre could not immediately be reached.
The lawsuit, filed in Manhattan federal court, marks a dramatic expansion of regulatory efforts to hold people and companies responsible for activity that contributed to the nation's financial crises. It also comes as lawmakers in Washington debate sweeping reform of financial industry regulation.
"This is big," said Walter Todd, a portfolio manager at Greenwood Capital Associates LLC. "Reputationally, obviously, it is damaging. I'm still kind of in shock."
In morning trading, Goldman shares sank $22.30, or 12.1 percent, to $161.97 on the New York Stock Exchange. Other bank stock also fell.
GOLDMAN HID INFORMATION, SEC SAYS
In its lawsuit, the SEC alleged that Goldman structured and marketed a synthetic collateralized debt obligation, ABACUS, that hinged on the performance of subprime residential mortgage-backed securities.
It alleged that Goldman did not tell investors "vital information" about ABACUS, including that Paulson & Co was involved in choosing which securities would be part of the portfolio. It also alleged that Paulson took a short position against the CDO in a bet that its value would fall.
According to the SEC, the marketing materials for the CDO showed that a third party, ACA Management LLC, chose the securities underlying the CDO.
Paulson & Co paid Goldman $15 million to structure and market the CDO, which closed on April 26, 2007, the SEC said. Little more than nine months later, 99 percent of the portfolio had been downgraded, the agency said.
"In sum," the complaint said, "Goldman Sachs arranged a transaction at Paulson's request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests, but failed to disclose to investors ... Paulson's role in the portfolio selection process or its adverse economic interests." |
All the banks are dropping in stocks. |
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| ChemEnhanced |
| I heard that this morning.....not good news for banks |
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| SniFFleS |
| Great news if you are buying them! |
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| Abercrombie |
| This thread lacks interest. |
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| daves |
| good for them... bastards and their CDOs and CDSs should burn. |
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| Adamo |
| quote: | Originally posted by Abercrombie
This thread lacks interest. |
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| infinity HiGH |
| Good thing they got bailed out by the American tax payer last year. At least they can pay for all the lawyer bills. |
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| Jayx1 |
| i take pity on those who cheerlead the downfall of the US economy, and thus our economy. |
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| Nrg2Nfinit |
| i think sniffles was just cheerleeding the big market sale today. We have gone on for like a month without a correction. Plus everyone knows goldman sachs commit fraud. You can see how they easily manipulate the futures markets with their "predictions" to take long and short positions. |
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| PivotTechno |
| quote: | Originally posted by Jayx1
i take pity on those who cheerlead the downfall of the US economy, and thus our economy. |
Why? You can't rebuild unless you knock something down, first. |
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| spolitta |
| The title of this thread sounds ridiculous. |
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| mute79 |
| quote: | Originally posted by Jayx1
the rich always take care of themselves
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eh Jay? |
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