For those of you that know, Goldman Sachs was served with a civil indictment by the Securities and Exchange Commission (SEC). The SEC claimed that Goldman Sachs mislead investors and got them to invest in $2 billion dollars in securities in 2007 that were worth nothing. Goldman Sachs was hit with a fine of $550 million for “fraudulent misconduct”.
This however covers up the real crime that was committed. The fine for “fraudulent misconduct” was accepted to keep larger criminalities out of the public eye in the form of a criminal trial against the investing giant. This is evident in the fact that not one executive was actually held accountable for what happened.
In court Goldman Sachs admitted no wrong doing, at best it was only admitting to making a mistake. This is a very nice way of labelling the defrauding of investors and lying to the SEC.
Goldman Sachs and John Paulson plotted to scam investors by getting them in by into Abacus 2007-Ac1. It was a subprime mortgage-backed collateralized debt obligation created by Goldman Sachs. Paulson received help from Goldman Sachs to create the package and market it. Then he made a huge profit by betting against the CDO’s mortgages. Paulson collected a billion dollars from this scam.
The Abacus CDO was “synthetic”, meaning that investors did not actually buy any securities.
Goldman Sachs lied about the investment to investors. They did not tell investors that the securities for the CDO were selected by Paulson. Instead they told them that they were selected by ACA Management and that Paulson was putting 200 million dollars betting the value would rise.
Despite defrauding investors of billions of dollars, the courts decided that Goldman Sachs deserved only a $550 million fine. This $550 million fine is a slap on the wrist for Goldman Sachs. It represents only two weeks of its annual income.
All this was put on the table by the Obama Administration rather than having Goldman Sachs and Paulson prosecuted for “making materially misleading statements and omissions”. Many people lost all they had in this scam, but Paulson and Goldman Sachs made off like bandits.