Goldman Sachs charged with fraud on subprime mortgages

[Dinner]

I think it's cute that you guys actually think this will hurt Goldman. They're unstoppable.

I agree. This probably won't hurt them to much directly and they'll just pay a fine. On the other hand this might make Congress finally get serious about regulation reform in banking & finance. So far the Dems have just offered a weak sauce bank friendly bill while the Republicans are claiming there is no need for any reform at all.

[KrazyHorse]

Given that all parties to the deal in question were banks or hedge funds, I have no idea why you think this is a matter of being friendly to banks

[MikeH]

HE RESPONDED! Oerdin wins. No-one would have predicted that.

[Az]

Given that all parties to the deal in question were banks or hedge funds, I have no idea why you think this is a matter of being friendly to banks

yessssssssss

[DanS]

Goldman gives the American government orders, not the other way around.

Even if Goldman gave the American government orders and could institute a regulatory framework favorable to the company, only a small minority of its transactions are with the government. Does Goldman order around everybody else on Wall Street?

[Whoha]

Clearly, the answer to that question is yes.

[Drake Tungsten]

Does Goldman order around everybody else on Wall Street?

Of course. Did you really think otherwise?

[Az]

Whoha.

[Kidlicious]

Isn't their reputation already one big stain?

Not really, until they hired KH.

[Kidlicious]

No more too big to fail banks!

[Kidlicious]

http://http://economictimes.indiatim...ow/5824453.cms

NEW YORK: The case against Goldman Sachs Group Inc over a 2007 mortgage derivatives deal it set up for a hedge fund manager could be just the start
of Wall Street's legal troubles stemming from the subprime meltdown.

The US Securities and Exchange Commission charged Goldman with fraud for failing to disclose to buyers of a collaterlised debt obligation known as ABACUS that hedge fund manager John Paulson helped select mortgage derivatives he was betting against for the deal. Goldman denied any wrongdoing.

The practice of creating synthetic CDOs was not uncommon in 2006 and 2007. At the tail end of the real estate bubble, some savvy investors began to look for more ways to profit from the coming calamity using derivatives.

Goldman shares plunged 13 percent on Friday and shares of other financial firms that created CDOs also fell. Shares of Deutsche Bank AG ended down 9 per cent, Morgan Stanley 6 per cent and Bank of America, which owns Merrill Lynch, and Citigroup each declined 5 percent.

Merrill, Citigroup and Deutsche Bank were the top three underwriters of CDO transactions in 2006 and 2007, according to data from Thomson Reuters. But most of those deals included actual mortgage-backed securities, not related derivatives like the ABACUS deal.

Hedge fund managers like Paulson typically wanted to bet against so-called synthetic CDOs that used derivatives contracts in place of actual securities. Those were less common.

The SEC's charges against Goldman are already stirring up investors who lost big on the CDOs, according to well-known plaintiffs lawyer Jake Zamansky.

"I've been contacted by Goldman customers to bring lawsuits to recover their losses," Zamansky said. "It's going to go way beyond ABACUS. Regulators and plaintiffs' lawyers are going to be looking at other deals, to what kind of conflicts Goldman has."

An investigation by the online site ProPublica into Chicago-based hedge fund Magnetar's 2007 bets against CDO-related debt also turned up allegations of conflicts of interest against Deutsche Bank, Merrill and JPMorgan Chase.

Magnetar has denied any wrongdoing. Deutsche Bank declined to comment. Merrill and JPMorgan had no immediate comment.

The Magnetar deals have spawned at least one lawsuit. Dutch bank Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, or Rabobank for short, filed suit in June against Merrill Lynch over Magnetar's involvement with a CDO called Norma.

"Merrill Lynch teamed up with one of its most prized hedge fund clients -- an infamous short seller that had helped Merrill Lynch create four other CDOs -- to create Norma as a tailor-made way to bet against the mortgage-backed securities market," Rabobank said in its complaint filed on June 12 in the Supreme Court of New York.

The two matters are unrelated and the claims today are not only unfounded but were not included in the Rabobank lawsuit filed nearly a year ago, said Merrill Lynch spokesman Bill Halldin.

Rabobank was a lender, not an investor, he added.

Regulators at the SEC and around the country said they would be investigating other deals beyond ABACUS.

"We are looking very closely at these products and transactions," Robert Khuzami, head of the SEC's enforcement division, said. "We are moving across the entire spectrum in determining whether there was (fraud)."

Meanwhile, Connecticut Attorney General Richard Blumenthal said in a statement his office had already begun a preliminary review of the Goldman case.

"A key question is whether this case was an isolated incident or part of a pattern of investment banks colluding with hedge funds to purposely tank securities they created and sold to unwitting investors," Connecticut Attorney General Richard Blumenthal said in a statement.

[Az]

Before anyone cums in their pants, though, I would rather reiterate that I would not be surprised if that's actually part of a plan for GS stock buy-back to make the company private again. Unless you guys are planning to take some sort of active part in all of this charade (lol), I suggest just lying back and wait how it unfolds.

[Dinner]

Given that all parties to the deal in question were banks or hedge funds, I have no idea why you think this is a matter of being friendly to banks

I was talking about the banking reform bill pending in Congress not this set of charges.

[Wiglaf]

[Az]

Hahahaha that half-asleep euro looking guy owns.