As investigators in Massachusetts considered charging Wall Street firms for their role in the financial collapse, they focussed on Goldman Sachs because it had bundled and sold the shoddiest of sub-prime mortgage loans, setting up the housing market for a greater fall by continuing to sell shaky securities even as other banks withdrew.
Goldman last year agreed to pay up to $60 million to end that investigation, the first major settlement involving Wall Street’s role in the sub-prime crisis.
“Goldman was particularly active with respect to facilitating the lending by two of the more notorious and unsound sub-prime lenders, Fremont and New Century,” Attorney General Martha Coakley said on Wednesday. “Goldman was especially active with these companies in the latter stages of the sub-prime lending boom ... when it should have been clear to any responsible person that the sub-prime loan pools underlying securitisations suffered serious problems.”
Goldman has previously been accused of a range of misdeeds, from manipulating oil prices to using taxpayer money to pay bonuses.
“Anyone who’s ever done any investment through Goldman who’s lost a significant amount of money all the sudden starts to say, ‘Gee, I wonder if there was something else out there that they were doing, which they didn’t tell me about, which would have made me not want to invest?’ ” said Richard Scheff, chairman of law firm Montgomery, McCracken, Walker & Rhoads. “If I’m a person who’s lost money, why would I think it’s limited to this? You’re talking about someone’s duty to their clients.”
The company has maintained that it did nothing improper.
{{/usCountry}}The company has maintained that it did nothing improper.
{{/usCountry}}To help it cope with scrutiny, Goldman has hired former White House counsel Gregory Craig. Craig, now with the law firm Skadden Arps, said he was acting as a lawyer for Goldman, not a lobbyist.
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