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

Turkey's Controversial Reform Bill Giving Investors Jitters

Homeland security reform bill will give police new powers in search, seizure, detention and arrests, while restricting the rights of suspects, their attorneys More

Audio Slideshow In Kenyan Prison, Good Grades Are Path to Freedom

Some inmates who get high marks could see their sentences commuted to non-custodial status More

'Rumble in the Jungle' Turns 40

'The Champ' knocked Foreman out to regain crown he had lost 7 years earlier when US government accused him of draft-dodging and boxing officials revoked his license 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.
Victorious Secularists Face Challenge to Form Government in Tunisiai
X
Henry Ridgwell
October 30, 2014 11:39 PM
Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Victorious Secularists Face Challenge to Form Government in Tunisia

Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Africa Tells its Story Through Fashion

In Africa, Fashion Week is a riot of colors, shapes, patterns and fabrics - against the backdrop of its ongoing struggle between nature and its fast-growing urban edge. How do these ideas translate into needle and thread? VOA’s Anita Powell visited this year’s Mercedes Benz Fashion Week Africa in Johannesburg to find out.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.

All About America

AppleAndroid