Goldman Sachs Faces Fraud Charges for Subprime Mortgage Bonds

As one of the most widely recognized global investment banking and securities firm, Goldman Sachs is facing accusations of fraud by the Securities and Exchange Commission (SEC). The LA Times reports that the civil charges filed against Goldman Sachs have to do with an intricate mortgage-backed security the company created. The establishment of these collateralized debt obligations was done before our nation’s economic whirlpool.

In referring to Goldman Sachs’ product as “new and complex,” an SEC official also stated that the trickery and divergence of the product are “old and simple.” In making subprime mortgage bonds that potentially hold these fraudulent qualities, the SEC is accusing Goldman Sachs as well as one of the bank’s vice presidents with contributing to significant financial losses and our current credit disaster. This alone has alarmed investors across Wall Street, even though the investment bank has been scrutinized for financial transactions it took part in before the crisis went into full-swing. In addition, in coming out of the financial crisis more resilient than it was before, the potential consequences ahead of Goldman Sachs could be quite hefty.

While subprime loans can relate to mortgages, they can also include auto loans, personal lines of credit, and credit cards. The SEC suspects that Goldman Sachs failed to entirely notify investors about the specifics of the collateralized debt obligations, which resulted in a lot of money lost. In formulating and carrying out the charges against Goldman Sachs, the securities in question are noted to have been established for Paulson & Co. which is a hedge fund that brought in billions from gaming in opposition of the subprime mortgage market.

While subprime lending has its benefits, there are several cloudy areas that can lead borrowers to a point of no return. While the Goldman Sachs investigation relates to a broad scope of individuals and businesses affected, on a smaller but similar scale, victims of predatory lending cannot meet the terms of their high interest loans, which are sometimes deliberately made by subprime lenders. Investment loss attorneys in Pennsylvania and throughout the nation work to reverse the wrongdoing of stockbrokers and lenders for those victimized by predatory lending, investment loss and unfair lending practices.