Megabank Goldman Sachs Charged With Fraud Federal regulators charged the Wall Street megabank Goldman Sachs with civil fraud Friday. The Securities and Exchange Commission announced the charges in connection with subprime mortgage securities. Within minutes of the charges being announced, Goldman Sachs' shares fell more than 10 percent.
NPR logo Megabank Goldman Sachs Charged With Fraud

Megabank Goldman Sachs Charged With Fraud

Federal regulators charged the Wall Street megabank Goldman Sachs with civil fraud Friday. The Securities and Exchange Commission announced the charges in connection with subprime mortgage securities. Within minutes of the charges being announced, Goldman Sachs' shares fell more than 10 percent.

RENEE MONTAGNE, Host:

Goldman Sachs shares are down more than 10 percent on the news. NPR's Yuki Noguchi joins us now to talk about that story. Good morning.

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YUKI NOGUCHI: Good morning, Renee.

MONTAGNE: Now, what precisely has Goldman Sachs been charged with?

NOGUCHI: So you know, meanwhile that hedge fund manager was selling those securities short. So basically you have one of Goldman's clients undercutting these investors without them knowing it, and Goldman, according to the charge, was collecting on both ends of that deal.

MONTAGNE: Yeah, among the consequences for Goldman - and we can talk more about that - but its shares immediately began falling as soon as this came out. How is that going to affect the bank in the very near term?

NOGUCHI: The SEC has established a new division to look into some of these exotic investments, and so, you know, this case centers on this one product and this 31-year-old guy who ran that product, but you know, it depends on how aggressive the SEC gets in pursuing other cases like this, not just with Goldman but maybe even other banks.

MONTAGNE: Well, then what are the consequences though? I mean this is a civil fraud case. You know, sort of in the larger picture, what are the consequences?

NOGUCHI: So you know, a lot of it will depend on how - how widespread the practice was.

MONTAGNE: Well, then how does this fit into the landscape of subprime mortgages, bank failures and government bailouts - all together?

NOGUCHI: Well, you know, mortgage backed securities, because of these exotic instruments, were distributed in a lot of places. It's really hard for me to quantify, Renee, at this point, you know, how - what - how many of these kinds of cases we brought. But rest assured, there are a lot of exotic instruments and the SEC is bringing to bear a new team of people who are looking into this, and they are very eager to make sure that - that banks, you know, weren't double-dealing and they weren't misrepresenting their investments to consumers.

MONTAGNE: That's NPR's Yuki Noguchi on news that federal regulators have today charged Goldman Sachs will civil fraud. Thanks very much.

NOGUCHI: Thank you.

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