U.S. charges Goldman Sachs with civil fraud

[jimmy olsen]

Damn, didn't see that coming.

http://www.msnbc.msn.com/id/36597290/ns/business-us_business/

U.S. charges Goldman Sachs with civil fraud
Civil suit claims Goldman sold securities that were designed to fail

BREAKING NEWS
updated 10:55 a.m. ET April 16, 2010
Goldman Sachs Group, Inc.  $167.17 -$17.10  -9.28%

WASHINGTON - The government is accusing Wall Street powerhouse Goldman Sachs & Co. of defrauding investors in its disclosures about securities it sold tied to subprime mortgage securities as the housing market was faltering.

The Securities and Exchange Commission announced Friday civil fraud charges against Goldman Sachs and one of its vice presidents. The agency alleges that the company marketed complex subprime mortgage securities and failed to disclose to investors that a major hedge fund had bet against the securities.

[Admiral Yi]

Bizarre.

[Ed Anger]

Tim: Blind.

[jimmy olsen]

Tim: Blind.

Well obviously there were a lot shenanigans going on, but I thought it was creatively exploiting loopholes, corrupt accounting practices, and so on; not blatant fraud like this.

[Admiral Yi]

Well obviously there were a lot shenanigans going on, but I thought it was creatively exploiting loopholes, corrupt accounting practices, and so on; not blatant fraud like this.

Blatant fraud like what?

[DGuller]

Wow.  I didn't know the government had the balls to take on professional con-artists.

[Ed Anger]

Tim: Blind.

Well obviously there were a lot shenanigans going on, but I thought it was creatively exploiting loopholes, corrupt accounting practices, and so on; not blatant fraud like this.

Astounding.

[Grallon]

Hmmm... bail them out then beggar them with law suits?

I keep thinking mass executions would have a more profound psychological impact and would curb excessive greed better.




G.

[Tamas]

And of course they announce it during market hours, on options expiration day none the less. I guess the sec guys had some real nice insider action going.

And to think that most of the world thinks this is the free market.

[alfred russel]

And of course they announce it during market hours, on options expiration day none the less. I guess the sec guys had some real nice insider action going.

And to think that most of the world thinks this is the free market.

Nothing says unfettered free markets like insider trading.

If you are trading individual stocks during earnings season, you deserve to get burned even harder than you normally do, Tamas. 

[Tamas]

And of course they announce it during market hours, on options expiration day none the less. I guess the sec guys had some real nice insider action going.

And to think that most of the world thinks this is the free market.

Nothing says unfettered free markets like insider trading.

If you are trading individual stocks during earnings season, you deserve to get burned even harder than you normally do, Tamas. 

Nah, I only had a small short so I actually benefited

But to do insider trickery as part of a government institution meant to stop those... well that is wrong

[MadImmortalMan]

As of now, GS is down over 21 points. Ouch. Good thing I go nowhere near US bank stocks.

[Admiral Yi]

CNN had some discussion.  Turns out it wasn't just "a hedge fund," it was the the hedge fund that Goldman had hired to package subprimes for securitization.  No elaboration of how that hedge fund "bet against subprimes." 

[alfred russel]

CNN had some discussion.  Turns out it wasn't just "a hedge fund," it was the the hedge fund that Goldman had hired to package subprimes for securitization.  No elaboration of how that hedge fund "bet against subprimes."

http://sec.gov/litigation/complaints/2010/comp-pr2010-59.pdf

Summary: GS got $15 million to structure and market a subprime CDO. Paulson & Co--a hedge fund--had a role in picking the securities, but when marketing the CDO, GS disclosed only another party was the advisor. GS helped Paulson short the CDO, but a GS employee led another party to believe that Paulson was long. At the end of the day, the SEC alleges GS let Paulson help create a security that they were also helping him bet against, which obviously gave an incentive to create a security that would fail. The CDO lost over $1 billion, and Paulson profited about the same amount.

[Admiral Yi]

Ouch.  They're fucked.