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Goldman Sachs profits surge amid fraud scandal

Investment giant Goldman Sachs said its profits nearly doubled in the first quarter of 2010, a blockbuster gain eclipsed by allegations in the US and Europe that it duped investors.

business Updated: Apr 21, 2010 09:01 IST

Investment giant Goldman Sachs on Tuesday said its profits nearly doubled in the first quarter of 2010, a blockbuster gain eclipsed by allegations in the US and Europe that it duped investors.

The storied Wall Street investment bank posted first quarter earnings of 3.46 billion dollars, up a whopping 91 percent against the same three months a year ago, blowing Wall Street expectations out of the water.

But as Britain's financial watchdog said it would follow US authorities in probing Goldman's sale of controversial mortgage-backed derivatives, the firm's share price tumbled two per cent to under 160 dollars a share.

Wall Street is still reeling after the US Securities and Exchange Commission charged Goldman with fraud last Friday, sending the company's stock plunging 13 per cent from over 180 dollars a share.

The US watchdog accused Goldman of allowing a prominent hedge fund to help put together a package of subprime mortgages that were sold to Goldman clients, but which the fund was at the same time betting against.

Britain's financial regulator on Tuesday also launched a formal investigation in relation to the US fraud charges, London's Financial Services Authority said.

"The FSA will be liaising closely with the SEC in this review," it said in a brief statement.

The timing of the allegations could not be worse for Goldman, which has become the poster child for Wall Street excess as President Barack Obama presses Congress to pass the most sweeping reform of financial rules in a generation.

US Vice President Joe Biden appeared to lay into the firm during a speech championing reform on Tuesday at the Brookings Institution in Washington.

The finance bill, Biden said, would "block banks from steering clients toward a pit of toxic investments with one hand while betting against those very investments with the other hand."

"The president and I will not support any reform that fails to address these fundamental problems," he said.

The company has vigorously denied any wrongdoing and on Tuesday sought to defend its reputation as Wall Street's most stable finance house, using its earnings as 'exhibit A.'

"Our performance in the first quarter reflects more signs of growth across the economy and the strength of our client franchise," said Goldman chief executive Lloyd Blankfein.