Goldman Sachs Hit With Civil Fraud Charge

July 2, 2010 by · Leave a Comment
Filed under: General, SEC, Wall Street Reform 

The Securities and Exchange Commission (SEC) has announced a lawsuit against Goldman Sachs for creating and selling a mortgage investment that was secretly intended to fail. Goldman repudiated the charges, calling them “completely unfounded in law and fact,” and that it would “vigorously contest them and defend the firm and its reputation.” Furthermore, Goldman pointed out that it lost money on the transactions in question.

Central to the SEC’s case against Goldman and numerous others is how credit-rating firms downgraded 99% of the underlying mortgage securities by January 2008.

Though the SEC had informed Goldman as far back as the middle of last year of a possible suit, the fact that it was a civil fraud lawsuit came as a surprise. Goldman was not given the normal opportunity to discuss a settlement or prepare for the announcement.

Politicizing the SEC isn’t good for anyone. The market demands a level playing field. That the SEC terms some actors as worse than others is not good public policy. Everyone should get the same treatment, neither better nor worse.

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