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The article is about the case against Goldman Sachs, and it indicates that the struggle over the financial reform in the United States escalates. If bankers resist tighten regulation and challenge the blame, then the new high-profile revelations could follow.
Investment Bank of Goldman Sachs is under the investigation of the American Commission on Securities and Exchange Commission (SEC). Bank is accused in fraud – a concealed information about the risks when buying mortgage-backed bonds CDO. Following the U.S. investigation has moved to London, where Goldman Sachs fell under the attention of Financial Services (FSA) of the local regulator.
The news about allegations of fraud caused the fall of quotations by 15%.
Goldman Sachs pleaded guilty of one of his vice presidents, Fabrice Turre, who worked on the controversial deal in early 2007, and Turre has lost a banking license, but still retained the work in the bank – went on vacation. Overall, however, the bank has denied the regulators, promising that he would defend his reputation, even in court. This is despite the fact that it is easy to pay fines for controversial deal in which he earned $ 15 million, because only in the first quarter 2010 profit of the bank was up to 3.46 billion dollars.
The “Regulators against Goldman Sachs» could be an argument in determining ways to reform the Western financial system. Politicians and the public seeking to understand the role played by banks in the unfolding global crisis, in order to avoid this in the future.
The essence of the Abacus 2007-AC1 was that the hedge fund Paulson & Co, owned by well-known financier John Paulson, helped to select the problematic mortgage products for their securitization in the CDO. Hedge Fund purposefully chose exactly those mortgages, which had the most problems, since going to play in lowering the securities. However, Goldman Sachs did not tell investors about the role that Paulson has played in its formation, covering mortgage bonds the name of an independent financial manager of ACA. Worse, according to SEC, the bank deliberately introduced investors astray, giving them know that Paulson is going to buy securities in $ 200 million. s
As a result, investors lost about $ 1 billion on this particular transaction. About $ 150 million lost German bank IKB Deutsche Industriebank, who was later rescued by the Federal Government of Germany, that spent a $ 16 billion. The remaining 850 million dollars did not get the Dutch bank ABN Amro, which was later acquired by the British Royal Bank of Scotland.
U.S. senators are preparing to present new charges against Goldman Sachs, reports The New York Times. According to the newspaper, the bank committed fraudulent transactions not only with the Abacus 2007-AC1, what it has previously accused the Commission on the Securities and Exchange Commission (SEC), but also with several other complex financial instruments. But Goldman Sachs categorically admits his guilt, claiming that did not deceive customers.
The campaign against the Goldman Sachs and personally Turre revealed asecret of Wall Street. When in 2006 the real estate prices in the U.S. went down, big clients, primarily hedge funds, have decided to earn some money. To fund could play in the fall, banks have developed special products such as CDO. They are produced not only Goldman Sachs, and Deutsche Bank, UBS, Merrill Lynch and others. After posting these documents are usually quickly became cheaper, hedge funds earned, while investments of ordinary investors that the banks were not warned, “under whom” is output, devalued. According to Bloomberg, of such transactions on Wall Street held not less than 40 billion dollars. Therefore, Abacus 2007-AC1 was only the first case.
So, the conclusion is that Goldman Sachs and other companies used to sell securities backed by mortgages, at the same time playing on their fall from the calculation of profit. Now the SEC accuses Goldman Sachs, that he make and sell tools that should have been known to collapse to an important client could make money on it.