A scathing report by a U.S. Senate panel faulted Goldman Sachs Group Inc., Deutsche Bank AG and others for contributing to the financial crisis. This report will be helpful to investors who have filed lawsuits accusing the banks of putting their own interests ahead of those of their clients. The report by the Permanent Subcommittee on Investigations, which incidentally had bipartisan support, gave numerous examples of employees trashing the mortgage debt their banks were selling. Among the examples was a top Deutsche Bank trader who privately described some of the securities as “crap” and “pigs.” Another example involved a Goldman salesman announcing, “I think I found a white elephant, flying pig and unicorn all at once” in identifying a potential buyer for debt that his bank created. That sort of corporate mindset tells us lots about how bad these companies really were. Does this sort of talk remind you of a certain Texas company that hurt so many people a few years ago?
A good number of investors lost money from the securities being sold by the companies mentioned in the report. I believe the matters referenced in report will be extremely helpful in the investor litigation. The report comes after two years of work and refers to thousands of confidential emails and other documents. The report depicts Wall Street as a runaway machine that bundled risky debt into collateralized debt obligations and other types of secutities to win big fees, even as it worried that the resulting mess could unravel.
Among other entities whose actions or inaction the report addressed are the bankrupt Washington Mutual Inc., credit agencies Moody’s and Standard & Poors, and regulators including the Office of Thrift Supervision. The report describes how Goldman and Deutsche Bank deceived clients into buying securities that the banks suspected were likely to implode and bet against with their own money. This appears to be the strong belief of the investigators who did the work resulting in a very revealing report.
Interestingly, the report stops short of calling for sanctions against individual executives, traders and directors. It’s even more interesting that no senior bank officials have been held criminally liable in the United States for wrongdoing directly tied to the financial crisis. That’s rather difficult to understand. Surely some criminal laws were violated based on what we have learned in litigation arising out of this sort of thing.
Source: Insurance Journal
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