Wednesday, October 18th 2017

Senate Panel Determines Goldman Sachs Misled Clients


Thursday, April 14th, 2011
News

According to an investigative panel of the United States Senate charged with assessing the causes of the economic recession, Goldman Sachs has been singled out as one of the main contributors to the current economic situation. The lengthy report essentially accuses the firm of deliberately misleading clients regarding the company’s investments in securities backed by mortgages.

The lengthy investigation largely draws support for this conclusion based on internal documents and emails, including one from Greg Lippmann, who bluntly wrote off a $1.1 billion Deutsche Bank collateralized debt obligation. Another email on the same deal from Michael Lamont indicated that he would attempt to jettison the CDO before things went downhill. Apart from that, the report cites other examples of the same nature, and goes on to outline the failings of credit raters. The most significant accusation included here was that credit raters failed to reevaluate many ratings, despite recognizing that some of them might be inaccurate.

After the release of the findings of the two-year inquiry, some Senators are now calling for the Justice Department and Securities and Exchange Commission to investigate whether the company also misled its cliental with the intent of bolstering purchases of collateralized debt obligations backed by dubious loan schemes, which Goldman Sachs was simultaneously betting would drop in value, according to an article in the San Francisco Chronicle. While the report is likely to be the last official investigative measure into the matter, the sentiment to further investigate the matter is still prevalent in the Senate.

Goldman Sachs refuted these charges in a statement saying that they had been forthright with the information and had not misled anyone. Deutsche Bank spokeswoman Michele Allison stated in the same article that these views were clearly represented in market research from the firm, and that this was more of a case of divergent internal views.

Sources:

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/04/14/bloomberg1376-LJM1ZZ1A1I4H01-0I1LCCM3N3GBKP00UAS4L3S1L1.DTL

http://www.nypost.com/p/news/business/senate_targets_goldman_sachs_SU51oWEmJ82lLQSIbhjD2N           

 



Article by Andrew Timm

The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com



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Tags: collateralized debt obligation, credit ratings, goldman sachs, levin, senate panel

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