Goldman Sachs 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. The firm now faces its biggest test since the financial crisis.
Former Goldman workers say that in 2006, executives sided with traders who thought home prices would decline.
Goldman shares fell as much as 15 percent Friday, pulling down other financial stocks, and costing the bank more than any conceivable fine — but is the market overreacting?
The accusations have only just begun to reverberate in the wider financial world, raising the question of what the ultimate stakes will be.
The bank is set to hand out more than $5.3 billion to its staff for the the first three months of the year, The Times of London reported.
Savvy investors like John A. Paulson and Steve Eisman, who pushed for the rise of synthetic C.D.O.’s — and their ability to use credit-default swaps to short subprime mortgage bonds — took an already bad situation and made it worse, The New York Times’s Joe Nocera writes in his latest Talking Business column.
If Goldman is guilty of what the S.E.C. is charging, it amounts to white-collar looting, The New York Times’s Paul Krugman wrote in his latest Op-Ed.
Richard X. Bove, the outspoken banking analyst, wants the leaders of Goldman to “fall on their swords” after the firm was accused of securities fraud.
The Financial Services Authority, Britain’s financial regulator, said Tuesday it opened a formal investigation into Goldman Sachs in relation to recent accusations the firm defrauded investors.
In accusing Goldman of defrauding investors, regulators are not only taking aim at a company with deep pockets and a will to fight — they are also pursuing an unusual claim that could be difficult to prove in court, legal experts said.
In lengthy defenses prepared for the Securities and Exchange Commission last fall, Goldman argued that it didn’t mislead anyone in its Abacus mortgage investment. Instead, it argues essentially, buyers should have been wary.
ABN Amro, one of two banks cited by the Securities and Exchange Commission in the Goldman case as buying the derivatives that soon went sour, came to those bets late in the game, according to Financieele Dagblad.
The American International Group is reviewing its options regarding $6 billion worth of insurance policies it wrote to cover Goldman-constructed collateralized debt obligations, a person briefed on the matter told DealBook, echoing a report by The Financial Times.
Goldman’s problems are spilling over into the U.S. midterm elections as Congressman Mark Kirk, the Republican nominee for an open Senate seat in Illinois, said he will return contributions made by employees of the bank, Bloomberg News reported.
Fabrice Tourre, the 31-year-old Goldman Sachs vice president cited by the Securities and Exchange Commission in their accusation of securities fraud against the bank, followed a beaten path from the French grandes ecoles to Wall Street.
The case also raises a far broader issue that goes to the heart of how Wall Street has strayed from its intended mission, Roger Lowenstein writes in an opinion piece for The New York Times.
Lloyd C. Blankfein has assured employees that Goldman will prevail in the civil fraud suit against it.
Wall Street has gotten a lot of mileage out of the accusation that the political system simply doesn’t understand how Wall Street works, The Washington Posts’s Ezra Klein writes. The problem is — Wall Street doesn’t understand how Wall Street works either.
Richard S. Fuld Jr., Lehman Brothers‘s former chief executive, plans to tell the House Financial Services Committee on Tuesday that he’d never heard of “Repo 105,” the now-infamous accounting maneuver, before a court-appointed examiner’s report was published last month.
Citigroup said Monday that it was “not involved” in the government’s fraud investigation into Goldman Sachs’s subprime mortgage dealings, but the bank once again acknowledged that regulators were looking at its subprime business.
Citigroup’s largest individual shareholder on Monday had kind words for the bank’s $4.4 billion first-quarter profit.
How did Citigroup trounce JPMorgan Chase and Bank of America? Breakingviews takes a look at the megabank’s best showing in almost three years.