Washington - The Securities and Exchange Commission Friday charged Goldman Sachs & Co. and one of its executives with fraud in a risky offshore deal backed by subprime mortgages that cost investors more than $1 billion.
The SEC also contends that Goldman allowed a client, Wall Street hedge fund Paulson & Co., to help select the securities to be sold. Paulson in turn bought insurance against the deal and when the securities tanked, losing almost all their value, Paulson made a $1 billion profit.
The civil fraud charges were the first to be filed against Goldman, the prestigious Wall Street investment-banking titan that's at the center of multiple inquiries into the causes of the global financial meltdown.
Paulson has acknowledged that it reaped a $3.7 billion profit by betting against the housing market as it nose-dived in 2006 and 2007.
The securities cited by the SEC were part of a series of offshore sales known as ABACUS.
The Goldman executive, vice president Fabrice Tourre, 31, was principally responsible for structuring the ABACUS deal known as 2007-AC1, a so-called synthetic package in which investors didn't buy any actual securities. Instead, they bet on the performance of a specified bundle of home loans to marginally qualified borrowers.
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Blankfein May Consider Stepping Down at Goldman, N.Y. Times Says
Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd Blankfein may consider stepping down because of fatigue from guiding the bank through the financial crisis, the New York Times reported, citing two unidentified persons who spoke with Blankfein.
The possibility that Blankfein might resign has prompted speculation over who might succeed him, the newspaper added.
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