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Posts Tagged ‘Collateralized Debt Obligations’

Goldman Sachs fraud charges ‘just the tip of the iceberg’: prof

Raw Story- By Andrew McLemore
Saturday, April 17th, 2010 — 10:06 pm

Charges of fraud brought against banking titan Goldman Sachs by the Securities and Exchange Commission rocked financial markets Friday, but experts say the allegations are merely the first of many to come, Reuters reported.After the SEC went public with the allegations, the Dow Jones dropped 125 points and Goldman Sachs stocks dropped 13 percent — the largest one-day drop in company history.

“This is just the tip of the iceberg,” said James Hackney, a professor at Northeastern University School of Law. “There are a lot of folks out there in different deals who played similar roles, and once it starts building steam, plaintiffs’ lawyers will figure out this is where the money is and there should be a lot of action.”

Reuters Global editor at large Chrystia Freeland said the significance of the charges is “huge.”

Goldman Sachs’ members like to think of themselves as “the smartest, the richest,” but Freeland said they also like to think of themselves as the “most virtuous.”

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Goldman Sachs FRAUD Charges Filed By SEC Over Subprime Mortgage Securities

Huffington Post |  Ryan McCarthy First Posted: 04-16-10 10:51 AM   |   Updated: 04-16-10 11:49 AM

The Securities and Exchange Commission has charged Goldman Sachs with civil fraud over its controversial collateralized debt obligations tied to the subprime mortgage market.

As the New York Times notes in its in-depth story on the subject, the charges are “the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market.” A London-based vice president at Goldman, Fabrice Tourre, was also charged in the complaint.

In essence, the SEC claims Goldman Sachs and one of its top officers misled investors by failing to disclose that hedge fund manager John Pauson, who made billions betting against the housing market, selected the assets that went into a complex security called “Abacaus”.

Paulson, the SEC alleges, “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.”

But Goldman Sachs, which was allegedly paid $15 million by Paulson, did not disclose these facts to investors who bought Abacus, according to the complaint.

Here’s the SEC’s full release — scroll down for the complaint:

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