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

Map Shows Every US School Shooting Since 2013

There have been at least 150 school shootings in the United States since 2013, an average of nearly one per week More

Video In US, Columbus Day Still Generates Controversy

Holiday marks date Columbus discovered Americas, but some are offended by legacy because he enslaved many natives he encountered More

Video Kickboxing Champion Shares Sport With Young Migrants

Pouring into Europe by hundreds of thousands, some migrants, especially youngsters, are finding sports a way to integrate into new host countries More

This forum has been closed.
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.
Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemeni
Henry Ridgwell
October 12, 2015 4:03 PM
The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video Amnesty Accuses Saudi Coalition of ‘War Crimes’ in Yemen

The human rights group Amnesty International has accused the Saudi-led coalition of war crimes in airstrikes against Houthi rebels in Yemen. Henry Ridgwell reports the group says hundreds of civilians have been killed in strikes on residential areas.

Video No Resolution in Sight to US House Speaker Drama

Uncertainty grips the U.S. Congress, where no consensus replacement has emerged to succeed Republican House Speaker John Boehner after his surprise resignation announcement. Half of Congress is effectively leaderless weeks before America risks defaulting on its national debt and enduring another partial government shutdown.

Video New Art Exhibit Focuses on Hope

Out of struggle and despair often comes hope. That idea is behind a new art exhibit at the American Visionary Art Museum in Baltimore, Maryland. "The Big Hope Show" features 25 artists, some of whom overcame trauma and loss. VOA’s Deborah Block reports.

Video Columbus Day Still Generates Controversy as US Holiday

The second Monday of October is Columbus Day in the United States, honoring explorer Christopher Columbus and his discovery of the Americas. The achievement is a source of pride for many, but for some the holiday is marked by controversy. Adrianna Zhang has more.

Video Anger Simmers as Turks Begin to Bury Blast Victims

The Turkish army carried out new air strikes on Kurdistan Workers Party (PKK) targets on Sunday, a day after the banned group announced a unilateral cease fire. The air raids apparently are in retaliation for the Saturday bombing in Turkey's capital Ankara that killed at least 95 people and wounded more than 200 others. But as Zlatica Hoke reports, there are suspicions that Islamic State is involved.

Video Bombings a Sign of Turkey’s Deep Troubles

Turkey has begun a three-day period of mourning following Saturday’s bomb attacks in the capital, Ankara, that killed nearly 100 people. With contentious parliamentary elections three weeks away, the attacks highlight the challenges Turkey is facing as it struggles with ethnic friction, an ongoing migrant crisis, and growing tensions with Russia. VOA Europe correspondent Luis Ramirez reports.

Video Afghanistan’s Progress Aided by US Academic Center

Recent combat in Afghanistan has shifted world attention back to the central Asian nation’s continuing civil war and economic challenges. But, while there are many vexing problems facing Afghanistan’s government and people, a group of academics in Omaha, Nebraska has kept a strong faith in the nation’s future through programs to improve education. VOA’s Greg Flakus has more from Omaha, Nebraska.

Video House Republicans in Chaos as Speaker Favorite Withdraws

The Republican widely expected to become the next speaker of the House of Representatives shocked his colleagues Thursday by announcing he was withdrawing his candidacy. The decision by Majority Leader Kevin McCarthy means the race to succeed retiring Speaker John Boehner is now wide open. VOA National Correspondent Jim Malone reports.

Video German, US Officials Investigate Volkswagen

German officials have taken steps to restore some of the reputation their car industry has lost after a recent Volkswagen diesel emissions scandal. Authorities have searched Volkswagen headquarters and other locations in an effort to identify the culprits in the creation of software that helps cheat on emission tests. Meanwhile, a group of lawmakers in Washington held a hearing to get to the bottom of the cheating strategy that was first discovered in the United States. Zlatica Hoke reports.

Video Why Are Gun Laws So Hard for Congress to Tackle?

Since taking office, President Barack Obama has spoken out or issued statements about 15 mass shootings. The most recent shooting, in which 10 people were killed at a community college, sparked outrage over the nation's gun laws. But changing those laws isn't as easy as many think. VOA's Carolyn Presutti reports.

Video In 'He Named Me Malala,' Guggenheim Finds Normal in Extraordinary

Davis Guggenheim’s documentary "He Named Me Malala" offers a probing look into the life of 18-year-old Malala Yousafsai, the Pakistani teenager who, in 2012, was shot in the head by the Taliban for standing up for her right to education in her hometown in Pakistan's Swat Valley. Guggenheim shows how, since then, Malala has become a symbol not as a victim of brutal violence, but as an advocate for girls’ education throughout the world. VOA’s Penelope Poulou has more.

Video Paintable Solar Cells May Someday Replace Silicon-Based Panels

Solar panels today are still factory-manufactured, with the use of some highly toxic substances such as cadmium chloride. But a researcher at St. Mary’s College, Maryland, says we are close to being able to create solar panels by painting them on a suitable surface, using nontoxic solutions. VOA’s George Putic reports.

VOA Blogs