Tuesday, November 03, 2009
Wall Street powerhouse Goldman Sachs sold more than $40 billion in securities just prior to the collapse of the housing market without telling its buyers of the risky investments that had been packaged together. As a result of the investment bank’s actions, pension funds, insurance companies, labor unions and foreign financial institutions are facing huge losses, according to a five-month investigation by McClatchy Newspapers. The question now is whether Goldman executives will be investigated by the federal government for committing fraud and other violations.
“The Securities and Exchange Commission should be very interested in any financial company that secretly decides a financial product is a loser and then goes out and actively markets that product or very similar products to unsuspecting customers without disclosing its true opinion,” Laurence Kotlikoff, a Boston University economics professor, told Greg Gordon of McClatchy. “This is fraud and should be prosecuted.”
Meanwhile, Goldman benefited from the government bailout of Wall Street, receiving money directly from the Treasury Department and billions more from AIG after it was rescued. Meanwhile, Goldman’s rival, Lehman Brothers, was allowed to collapse, and other competitors like Bear Stearns and Merrill Lynch were absorbed by other banks.
-Noel Brinkerhoff
How Goldman Secretly Bet on the U.S. Housing Crash (by Greg Gordon, McClatchy Newspapers)
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