Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail.
They knew the mortgages they based the securities on, the “liar loans”, were fraudulent and destined to default.
As the Abacus deals plunged in value, Goldman and certain hedge funds made money on their negative bets, while the Goldman clients who bought the $10.9 billion in investments lost billions of dollars.
Hopefully the criminal charges will soon follow.
The proper term is NINJA loans: No Income? No Job? Approved!
The problem with criminal charges being (and I don’t disagree that a crime has been committed) that the State (Ok, fed.gov) has to be able to prove a shared individual intent of criminality for a conspiracy charge and/or demonstrate some pretty unequivicol effort to escape liability (over and beyond “good business practice” of unloading deteriorating value investments) for a criminal malfeasence charge. To a “beyond reasonable doubt” standard, versus the “preponderence of the evidence” required in civil prosecutions (see? I did pay attention during all those jury duty voir dire’s here in Smith Co. :)).
All, it apparently very determinedly will go without saying, without implicating the semi-governmental agencies Freddie Mac and Fannie Mae (not to mention the entire FHA program) that implimented the policies that permitted this entire episode to occur at all.
Sadly, I think the likelihood of criminal charges decreases proportionally to the increased potential for documentable shared culpability by a different manifestation of the same fed.gov issuing the charges. Bawney and Cwis have ample pull for every bit of that all on their own. Maybe not pre-emptively, but in plenty of time to have charges quashed or ammended after the fact.
All the Justice money can buy (or budgetary control can contrive).