On the recordApril 20, 2010
Last Friday, the Securities and Exchange Commission (SEC) filed fraud charges against investment bank Goldman Sachs for misleading and defrauding investors through their selling of a complex financial product based on toxic subprime mortgages. These charges are serious, but the SEC should have been investigating the abusive practices that contributed to our financial crisis much sooner. American taxpayers could see past Goldman Sachs' smoke and mirrors. American taxpayers could see past Lloyd Blankfein's defense of his company when he said such things as ``We're very important.'' He went on to say, ``I'm doing God's work.'' Americans could see that there were problems on Wall Street well before the SEC was willing to publicly acknowledge it. Now, according to the SEC, Goldman Sachs was approached by one of the world's largest hedge funds, Paulson & Co., which asked the firm to create and market collateralized debt obligations (CDOs) whose values were linked to the value of toxic home loans. With billions being offered, Goldman Sachs obliged and created ABACUS, which the hedge fund then placed bets against, knowing that this new financial instrument was certain to lose value. Then, Goldman Sachs failed to tell ABACUS investors that the very hedge fund that helped to create and assemble the toxic CDOs, was betting against it.
