TPM Muckraker

« previous | MUCK HOME | next »

Report: Senate Subpoenas Goldman, Deutsche Bank, On Subprime Statements

Goldman Sachs and Deutsche Bank have received subpoenas from a Senate committee that's probing whether they committed fraud in connection to last year's financial collapse, the Wall Street Journal reports (sub. req.).

The Senate Permanent Subcommittee on Investigations, chaired by Carl Levin, is said to be looking into whether those firms, and perhaps others, had private doubts about the mortgage-backed securities they were putting together, despite their rosy public pronouncements about the complex products.

This is serious stuff. As we've told you, both the Justice Department and a House committee are investigating similar charges in connection to AIG, whose executives told investors as late as December 2007 that the company was not significantly exposed to the collapse of the subprime mortgage market. Knowingly lying to investors about such questions can potentially constitute criminal securities fraud. Both Goldman and Deutsche Bank had billions exposed to AIG's disastrous credit default swaps, and were ultimately made whole, indirectly, through AIG's bailouts.

Goldman has been in Congress's crosshairs lately. As the Journal notes, ten lawmakers recently sent a letter to Fed Chair Ben Bernanke, suggesting that the Wall Street behemoth is being given too free a rein to make risky investments once again.


8 Comments

| Leave a comment
user-pic

I'm kind of amazed actually. This is very heartening news!

user-pic

I'm with you here. I never would have thought they'd have the stones to even open an investigation.

Good news indeed!

user-pic

But are they going to delve into the wholly criminal machinations behind letting Bear Sterns die while simultaneously making sure Goldman Sachs survived?

user-pic

The big difference between the two is that BS held on to their CDOs while GS sold theirs or at least took out policies in the form of CDSs to hedge those holdings. BSs mistake is that they thougt these securities had value while GS did not. Even though both of them were creating these products, GS had the good sense to sell them to unsuspecting suckers.

In any case, Levin's investigation should help expose what the facts are.

user-pic

I don't know about that. Barack Obama hasn't commented on this.

user-pic

Hmmm...........

Could the whole system be broken
Well that all depends on who you ask,

1. Works fine if you are on the GS payroll
2. Works fine if your a politician.


1.(a)"The average Goldman worker could end up
taking home more than 10 times the typical
American family's income."
The average GS employee would finish the year
with approximately $773,000,
more than doubling the $363,000
they took home in 2008 and trumping the
$662,000 they made in 2007."
We all know who got screwed in 2007

2.(a) Barack Obama got $994,795 just in contributions from GS employees,
2.(b) they did hedge their buy/bet by giving $230,095 to John McCain

Well good Luck Carl Levin!

Kind of a dream but can we elect someone that has the same standard of living as the majority of Americans?

We are hurting down here and they want more.

REF. http://www.opensecrets.org

user-pic

This is going to be interesting, because the whole idea behind packaging up these securities was to game to bond-rating system (even assuming that the rating system had been working properly). If not for the gaming of the rating system, you wouldn't have been be able to buy all the components that went into a mortgage-backed security for less than you sold it for. That's how markets and arbitrage work.

So if the firms don't simply stall or refuse to honor the subpoenas they're going to find that the whole market was based on public pronouncements being more optimistic than private forecasts.

user-pic

I would like to note that Goldman Sachs Mortgage Securities Corporation did disclose their exposure to reservists called to action in Iran and Afganistan: "a very small loss due to the Civil Relief Act on the B-2 of the GSAMP Trust 2005-HE4. Losses per million at the Index level totaled $17.70." http://tinyurl.com/lm4nat

Civil Relief Act defined at: http://tinyurl.com/nrspv7

That risk was quantified.

Leave a comment

Advertisement
Please disable your adblocker!
Ads are how we pay the bills!

Subscribe
Tip Line

Josh
Marshall

Bio

Zachary
Roth

Bio

Advertise Liberally
Share
Close Social Web Email

"To" Email Address

Your Name

Your Email Address