FT.com / Companies / Banks - Goldman accused of subprime fraud
US authorities accused Goldman Sachs of fraud on Friday over a subprime mortgage security that caused $1bn-plus in losses to investors, in the toughest regulatory response so far to the excesses of the credit-bubble era.
Need I say more?
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Those are civil, not criminal charges. Which means that the SEC’s case is weak and the evidence largely circumstancial, or inadmissible in a criminal court. Civil court.
This case is unikely to go to trial anyway. Goldman will probably accept some minor disclosure violations in return for a slap on the wrist. The SEC will be able to demonstrate that it is doing “soemthing” about bubble-time excesses.
The idea however that Goldman’s clients will be able to sue is ridiculous. RBS and IKB were (on paper) sophisticated institutional investors who should have reiled on their own due diligence to make investment decisions. To admit now that they bought these CDOs solely on the basis of Goldman’s or another party’s recommendations would leave them exposed to charges of negligence.
Meanwhile, you could do worse with your pocket change than buy GS at $160.
Richard,
Caveats of innocent until proven guilty (etc, even though this is civil not criminal).
On the substance though, while 1 billion dollars is a lot of money, this is a drop in the bucket given the entirety of the government-fuelled housing bubble scandal.
Georges
@Georges
If Gillian Tett can say this is known to be true I’ll quote her
And why you suggest all banks were prior to 2008 mere agents of government is beyond me. Do you have no faith in their power to make decisions for themselves?
Next you’ll be saying the whole Thatcherite / neoliberal exercise was just a giant Soviet style central planning exercise
Richard,
Note, ‘fuelled’.
In the US, governmental fingerprints where/are all over the bubble:
1) Injudicious Fed policies (government)
2) Fannie Mae (government)
3) Freddie Mac (government)
4) The, as implemented, odious Community Reinvestment Act, also known as “the shakedown” (government)
5) If anything illegal was going on, where were the regulators (government)
Or do these key elements not matter?
Georges
NB – Oh how wonderful it would be to have a true neoliberal exercise take place. ‘Survival of the fittest’ is not a bad place to start from when developing any policy.
NB2 – What Ted says too!
@Georges
So the poor little dears in banking are not capable of independent analysis?
Or forming their own risk assessment?
Or saying no?
Is that it?
In which case let’s change the crew now
We all agree that bankers are adults enough to make and live by their investment decisions.
And this is exactly why any claim by IKB, RBS or other investors (which you enthusiastically endorse in another post) has no merit and will be rejected.
And the market this morning seems to not give a toss about this story. Tells you anything you need to know.
@Ted G
Oh yes:
http://www.ft.com/cms/s/0/5e72633e-4b7f-11df-9db6-00144feab49a.html