"Goldman Sachs cleared in subprime mortgage inquiry" by Ben Protess | New York Times August 10, 2012
Goldman Sachs has disclosed that it was cleared of wrongdoing after an investigation into a $1.3 billion subprime mortgage deal, a surprising victory for the bank.
The Securities and Exchange Commission’s decision to forgo action is an about-face for the federal regulator. In February, the SEC notified Goldman that it planned to pursue a civil enforcement action over the deal, a package of subprime mortgages in Fremont, Calif., that the bank sold to investors in 2006.
The SEC was examining whether Goldman misled investors into thinking the mortgage securities were a safe bet. At the time, Goldman said it would fight to convince regulators that they were mistaken.
On Monday, the bank learned that it was successful. Goldman was ‘‘notified by the SEC staff that the investigation into this offering has been completed,’’ the bank said in a quarterly filing released Thursday, ‘‘and that the staff does not intend to recommend any enforcement action.’’
The announcement is the latest indication that federal investigations into the financial crisis are petering out as the deadline to file cases approaches. While the SEC has brought more than 100 financial crisis-related cases, including a major action against Goldman in 2010, the agency was aiming to take a final crack at punishing Wall Street for its role in the crisis.
After President Obama announced the creation of a special task force in January to investigate the residential mortgage mess, the SEC and other authorities vowed to hold the banks accountable.
This is holding them accountable, huh?
Wall Street packaged and sold subprime mortgages to investors, as well as the government-owned mortgage finance giants Fannie Mae and Freddie Mac, which suffered billions of dollars in losses.
Goldman’s Fremont deal, known as Fremont Home Loan Trust 2006-E, was one piece of a broader investigation into the mortgage-backed securities. Wells Fargo and JPMorgan Chase have also received warnings of potential action by the SEC.
Oh, I'm sure they are shivering in their boots after this decision.
‘'Mortgage products were in many ways ground zero in the financial crisis,’’ Robert Khuzami, the agency’s enforcement director, said at a news conference.
Also see: BANKERS GONE WILD
WALL STREET'S MORTGAGE-BACKED SECURITY FRAUD DESTROYED BOTH THE US AND EU ECONOMIES!
Why aren't any of them in jail?
The agency, along with other federal regulators and the Justice Department, is also pursuing an array of other cases stemming from the financial crisis.
The banks face an international inquiry into interest-rate rigging. More than a dozen banks around the world are under investigation for manipulating a benchmark rate to bolster profits and deflect concerns about their health. In June, British and US authorities delivered the opening blow in the case, fining Barclays $450 million for its efforts to manipulate the London interbank offered rate, or Libor.
See: Congress Grilled Geithner About LIBOR
In a regulatory filing Thursday, JPMorgan further outlined its exposure to the case. While the bank has previously disclosed that it received subpoenas and requests for interviews from an array of authorities, including the SEC, Justice Department, Commodity Futures Trading Commission, and regulators overseas, the bank revealed new details Thursday about its exposure to private litigation.
JPMorgan said that brokerage firms and local towns that sued the bank, claiming they lost money because of problems with Libor, have cited wrongdoing starting in 2005. Until now, the bank said the scrutiny dated back to 2006.
Also see: JPMorgan Made $5 Billion in the Second Quarter
Well, almost. They revised it down a half billion.
Goldman is not involved in the Libor case. The bank, however, is not yet off the hook for the Fremont deal. Last year, the regulator overseeing Fannie and Freddie filed suits against 17 financial firms that sold the mortgage giants nearly $200 billion in mortgage-backed securities that later soured.
You really should see Inside Job, readers.
In its action against Goldman, the Federal Housing Finance Agency cited the Fremont investment.
Still, the announcement Thursday is welcome news for Goldman, allowing the bank to avoid another major battle with the SEC over the mortgage crisis.
And no chump change fine either!
Related: Bank Book: AIG's Beneficiary
I'll give you one guess who it was.
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