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SEC Charges Goldman Sachs With Fraud On Subprime Mortgages

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  • Fri, Apr 16, 2010 - 03:17pm

    #1

    goes211

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    SEC Charges Goldman Sachs With Fraud On Subprime Mortgages

http://www.benzinga.com/markets/company-news/227928/sec-charges-goldman-sachs-with-fraud-on-subprime-mortgages-gs

The SEC has charged Goldman Sachs (NYSE: GS) with fraud in relation to subprime mortgages. The SEC filing says that “the Securities and Exchange Commission today charged Goldman Sachs & Co. and one of its vice-presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.”

“The SEC alleges that Goldman Sachs structured and marketed a synthetic collateralized debt obligation (CDO) that hinged on the performance of subprime residential mortgage-backed securities (RMBS). Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.”

The filing continues: “The product was new and complex but the deception and conflicts are old and simple,” said Robert Khuzami, Director of the Division of Enforcement. “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party.”

“The SEC alleges that one of the world’s largest hedge funds, Paulson & Co., paid Goldman Sachs to structure a transaction in which Paulson & Co. could take short positions against mortgage securities chosen by Paulson & Co. based on a belief that the securities would experience credit events.”

This appears to be a huge story, as Goldman (GS) has been called out for their activity during the financial crisis by a number of different sources. This stock is a SELL. Where there is smoke there is fire. Right now it is impossible to quantify where this story could go and what the potential consequences are. Currently, the shares have lost 10% to $165.85. This development may allow investors to pick up some unreasonably cheap GS shares, but now is not the time to step in. The reporting on CNBC is suggesting that Goldman’s conduct was unethical to say the least.

  • Fri, Apr 16, 2010 - 04:02pm

    #2
    Peak Prosperity Admin

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    Re: SEC Charges Goldman Sachs With Fraud On Subprime …

I’ll bet nothing comes of it.

They’ll find a few scapegoats and then its business as usual.

  • Fri, Apr 16, 2010 - 04:05pm

    #3
    Peak Prosperity Admin

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    Re: SEC Charges Goldman Sachs With Fraud On Subprime …

[quote=Johnny Oxygen]

I’ll bet nothing comes of it.

They’ll find a few scapegoats and then its business as usual.

[/quote]

 

Bingo. 

  • Fri, Apr 16, 2010 - 04:08pm

    #4
    Peak Prosperity Admin

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    Re: SEC Charges Goldman Sachs With Fraud On Subprime …

I’ll believe it when I see the perp walks.

  • Fri, Apr 16, 2010 - 04:13pm

    #5
    Peak Prosperity Admin

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    Re: SEC Charges Goldman Sachs With Fraud On Subprime …

I mean do you think the SEC didn’t already know all of this years ago?

The only reason its taken so long to come out is so that Goldman and the SEC had time to get their story straight and position themselves advantageously.

  • Fri, Apr 16, 2010 - 04:55pm

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    Peak Prosperity Admin

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    Re: SEC Charges Goldman Sachs With Fraud On Subprime …

I just heard on CNBC(heerleader) that Obama is having a meeting with some advisory committee on regulation this afternoon. Coincidence?

  • Fri, Apr 16, 2010 - 05:09pm

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    Peak Prosperity Admin

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    Re: SEC Charges Goldman Sachs With Fraud On Subprime …

Great Kabuki Theater.

I think another building 7 will get blown up. LOL

V

  • Fri, Apr 16, 2010 - 05:12pm

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    Peak Prosperity Admin

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    Re: SEC Charges Goldman Sachs With Fraud On Subprime …

[quote=Johnny Oxygen]

I mean do you think the SEC didn’t already know all of this years ago?

The only reason its taken so long to come out is so that Goldman and the SEC had time to get their story straight and position themselves advantageously.

[/quote]

 

Agree 100%

They could have started filing charges on these sorts of things years ago.  Total Kabuki theater as usual.

What could make this interesting is if some whistleblowers start coming out of the woodwork and really blow a lid off things. 

 

 

  • Fri, Apr 16, 2010 - 05:20pm

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    Peak Prosperity Admin

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    Re: SEC Charges Goldman Sachs With Fraud On Subprime …

 Either the SEC diligently pursues goldman for billions or the accept a 200 million as a settlement. Based on the past the SEC will probably settle.

If the gov was intent on truly prosecuting goldman a nasty lawsuit would have been brought last year when GS was weak. How convenient that the suit is brought when GS is back on its feet making billions per quarter.

  • Fri, Apr 16, 2010 - 05:23pm

    #10
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    Re: SEC Charges Goldman Sachs With Fraud On Subprime …

[quote=joemanc]

I just heard on CNBC(heerleader) that Obama is having a meeting with some advisory committee on regulation this afternoon. Coincidence?

[/quote]

I’m sure the release was timed to help push financial reform through and pre-empt republicans from making some bs argument about how it will hurt the banks. Although the reform is still going to be watered down and won’t really solve any problems.

Speaking of CNBC, I can’t wait to see how Jimmy Cramer side steps this direct blow to the bank he loves to defend.

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