U.S. Accuses Goldman Sachs of Fraud

[w¡n9Nµ7 §£@¥€r 123]

Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail.

...

Goldman itself profited by betting against the very mortgage investments that it sold to its customers.

...

The instrument in the S.E.C. case, called Abacus 2007-AC1, was one of 25 deals that Goldman created so the bank and select clients could bet against the housing market.

...

Goldman created Abacus 2007-AC1 in February 2007, at the request of John A. Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst.

Goldman let Mr. Paulson select mortgage bonds that he wanted to bet against — the ones he believed were most likely to lose value — and packaged those bonds into Abacus 2007-AC1, according to the S.E.C. complaint. Goldman then sold the Abacus deal to investors like foreign banks, pension funds, insurance companies and other hedge funds.

But the deck was stacked against the Abacus investors, the complaint contends, because the investment was filled with bonds chosen by Mr. Paulson as likely to default. Goldman told investors in Abacus marketing materials reviewed by The Times that the bonds would be chosen by an independent manager.

“The product was new and complex, but the deception and conflicts are old and simple,” Robert Khuzami, the director of the S.E.C.’s division of enforcement, said in a statement

http://www.nytimes.com/2010/04/17/business/17goldman.html

[Obama 2012 1,714]

Goldman Sachs wasn't the only bank doing this....

This is the type of ####### though we can thank for tanking the economy.

The worst part about it, is it was all pretty legal too because the Federal Government IGNORED it for so damn long (though some tried to stop it).

It's a bit late to file suit now as the damage has been long since done.... Better late than never I suppose...

[The_Dude 1,142]

I wonder if this is the sort of exemplary behavior from investment banks that Mitch McConnell was thinking of when he came out in favor of less regulation rather than more.

[w¡n9Nµ7 §£@¥€r 123]

Goldman Sachs wasn't the only bank doing this....

Probably not, so the easier way out here would have been to go after a smaller and less politically connected bank.

But instead, they've chosen to go after Goldman.

[The_Dude 1,142]

Well, the timing of this at least puts Henry Paulson in the clear. I'm sure that will upset quite a few at moveon.org

[alienlovechild 75]

I wonder if this is the sort of exemplary behavior from investment banks that Mitch McConnell was thinking of when he came out in favor of less regulation rather than more.

Quid pro quo

"Goldman is lobbying hard on financial regulation, but that doesn't mean they're lobbying "against" regulation. And they certainly shouldn't be considered White House foes: Goldman was Obama's No. 1 corporate source of funds in 2008."

http://www.washingtonexaminer.com/opinion/columns/Goldman-rallies-for-Obama-in-Wall-Street-_reform_-90957879.html

[mawilson 2,133]

Good start, but I'd like to see criminal - not civil - charges.

[The_Dude 1,142]

Good start, but I'd like to see criminal - not civil - charges.

I would too, but in the end, what is a more suitable punishment, losing hundreds of millions of dollars, or 18 months in a minimum security federal prison?

[mawilson 2,133]

I would too, but in the end, what is a more suitable punishment, losing hundreds of millions of dollars, or 18 months in a minimum security federal prison?

Federal prison.

[Kevin and 10]

I would too, but in the end, what is a more suitable punishment, losing hundreds of millions of dollars, or 18 months in a minimum security federal prison?

I would say paying back those who were swindled out of money, but paying back 300 million+ people isn't going to happen. They should lose the money and serve jail time.

[w¡n9Nµ7 §£@¥€r 123]

They should get stuck in federal prison with the general population. Let them get some love from the homies.

[Kevin and 10]

They should get stuck in federal prison with the general population. Let them get some love from the homies.

Gitmo for all of them.

[w¡n9Nµ7 §£@¥€r 123]

Gitmo for all of them.

Naah. American domestic prisons are much worse.

[alienlovechild 75]

Naah. American domestic prisons are much worse.

Agree

[The_Dude 1,142]

Agree

You know they will get sent to some minimum security prison and be segregated. I think 5 years in San Quintin would be an appropriate sentence.