Finance

What's Next In The Goldman Sachs Case?

Here are the key developments in the Goldman Sachs fraud case the SEC announced on Friday:

The SEC is looking into mortgage deals packaged by other banks, the WSJ reports.

Deutsche Bank, UBS and Merrill Lynch (now owned by B of A) all put together mortgage-based investments that "soon went sour," the Journal says, but it isn't clear which deals the SEC is investigating. Several banks "helped market designed-to-fail investments on behalf of the hedge fund Magnetar, which was betting on that failure," Paul Krugman writes in his NYT column today. Krugman cites the reporting of Planet Money partner ProPublica; ProPublica's Web site has more on which banks were involved in these deals.

The leaders of the U.K. and Germany called for investigations of Goldman.

The biggest loser in the Goldman deal that's the focus of the SEC suit wound up being the Royal Bank of Scotland, which paid out roughly $841 million, according to the SEC's complaint. RBS was bailed out by the British government. The German bank IKB, which also received a bailout, lost nearly $150 million on the deal.

Goldman made several arguments to rebut the SEC charges.

In a statement, Goldman said the investors in the deal, who were "among the most sophisticated mortgage investors in the world," "were provided extensive information about the underlying mortgage securities." That allowed them to assess the risks those securities presented. Goldman denies the SEC's charge that it said Paulson & Co. was going to be a long investor in the deal. (Paulson took the short side of the deal.) And, Goldman says, it lost $90 million of its own money on the deal. Goldman is reporting its quarterly earnings tomorrow, by the way.

Politicians rushed to tie the Goldman case to finance reform.

If you Google "Goldman Sachs SEC," one of the ads that comes up is a headline that says "Help Change Wall Street." Click on it, and you're sent to barackobama.com, where you get a message about "accountability on Wall Street." The site is run by the Democratic National Committee, according to Politico, which wrote about the ad. We'll doubtless hear more about Goldman this week from the Senate, which is scheduled to debate the big finance-reform bill.

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