News / USA

US Regulators Charge Goldman Sachs With Fraud

The company, one of the world's leading financial firms, is denouncing allegations that it bilked investors out of more than $1 billion

U.S. financial regulators are charging one of the world's leading financial firms, Goldman Sachs, with fraud in a case that allegedly cost investors more than $1 billion. Goldman says it has done nothing wrong and vows to defend itself in court.  The charges grow out of the collapse of the housing market that helped spark the worst recession in decades for the U.S. and global economies.

The U.S. Securities and Exchange Commission (SEC) alleges that Goldman lied to investors about securities tied to subprime mortgages just as the housing market was beginning to falter.

It has long been a common practice to gather mortgages into groups and sell the packages as securities to investors seeking good returns and low risk.

But the SEC says Goldman did not tell investors that a hedge fund paid them millions of dollars for the right to select which mortgages would go into the securities.  The fund allegedly picked flawed mortgages and then set up complex transactions that would pay them well if the securities defaulted.   

Goldman called the charges "unfounded" and promised to "vigorously contest" them in court.  The firm admits it made bets against the success of some mortgage-backed securities, but Goldman says those were designed to balance the risk of some other investments.  

The SEC lawsuit is seeking to fine Goldman and force it to return profits it received from the alleged fraud.  

The Chief Market Analyst at Jeffries and Company, Art Hogan, says the case is hurting Goldman's stock price and the value of other financial firms, at least in the short term. "Goldman Sachs has been long one of the top investment banks. If you look back over the last couple of years of this financial crisis we went through, they certainly were able to come out of it in a better fashion than Bear Sterns or Lehman did.  They have got a reputation for having very, very aggressive trading and very, very smart people working there, that's long been the case.  They have had decades of the reputation of being one of the top investment banks and they certainly seem to have come out of the financial crisis in better shape than some of their competitors did," he said.

But University of Missouri law professor William Black says Goldman is in a "disastrous" situation, and its plight could hurt other major financial firms. "The charges are enormous in terms of their potential legal liability they have the potential to change the way people look at this crisis," he said.

Professor Black says Goldman is just the latest example of an elite financial firm accused of lying to investors.  He says widespread fraud should help Obama Administration efforts to pass major financial reforms intended to prevent future financial meltdowns.

You May Like

Disappointing Report on China's Economy Shakes Markets

In London and New York shares lost 3 percent, while Paris and Germany dropped around 2.4 percent More

DRC Tries Mega-Farms to Feed Population

Park at Boukanga Lonzo currently has 5,000 hectares under cultivation, crops stretching as far as eye can see, and is start of ambitious large-scale agriculture plan More

Video War, Drought Threaten Iraq's Marshlands

Areas are spawning ground for Gulf fisheries, a resting place for migrating wildfowl, source of livelihood for fishermen and herders who have called the marshes home for generations More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs