U.S. charges Goldman Sachs with civil fraud

updated 1 minute ago

WASHINGTON - The Securities and Exchange Commission has charged Goldman Sachs with securities fraud in a civil suit that claims the giant investment bank sold subprime mortgage securities that were designed to fail…

Goldman Sachs

Well, it’s a step in the right direction.

Yeah this was a long time coming. However, I would also welcome some criminal charges being laid and a return to the regulation that existed at the beginning of the Reagan era.

Nothing’s going to come of this. GS has a whole lot of protection:


I’ll believe that this is for real the minute I see Lloyd C. Blankfein or Gary D. Cohn frogmarched into the can.

It’s not even certain that the SEC will succeed in this suit. Making large trades of unregistered securities between large players such as banks and hedge funds is not the same thing as putting an elderly widow into commodity futures. These players knew or should have known what they were doing.

I thought that there were too many ex-GS employees in DC to see this happen
hopefully it is not just for show

That could still be the case. But the timing is right for the SEC to leverage the public distrust of Wall Street against Goldman Sachs.

Nobody is charging Paulson & Co., with anything, but Paulson’s hedge fund was the big winner on the deal, betting against the housing bubble at just the right time. I wish some of my mutual funds had bet against the housing bubble, and made a profit instead of a loss. But some people bet against it too soon, and lost money. So betting against a bubble is no sure thing; if you bet against the bubble before it peaks, you could lose big.

There’s nothing wrong with going short on any investment. There’s nothing wrong with assembling mortgage backed securities. There’s not even anything wrong with betting against MBS’s by using Credit Default Swaps. There’s nothing wrong with a broker taking both sides of a market. But what Goldman is accused of doing wrong is allowing Paulson to structure the mortgage backed securities, on which it sold credit default swaps.

Here’s an article about Paulson and one of the players there.

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