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April 20th, 2010

Update: AIG-Goldman Sachs Trades Should Be Probed by SEC, Cummings Says

Via: Business Week:

The regulator suing Goldman Sachs Group Inc. for fraud should widen its probe to determine whether securities backed by bailed-out insurer American International Group Inc. were improperly created, said two lawmakers.

It is “not beyond the realm of comprehension” that Goldman Sachs misled investors on collateralized debt obligations apart from the one cited last week by the Securities and Exchange Commission, Democratic Representatives Elijah Cummings and Peter DeFazio said in a letter to be sent to SEC Chairman Mary Schapiro. AIG, rescued by the U.S. in 2008, insured about $6 billion of Goldman Sachs CDOs named Abacus.

“Should any of these transactions be found to include fraudulent conduct, any resulting contractual payments from AIG- issued credit-default swaps could be viewed as ill-gotten gains,” Cummings and DeFazio wrote. “It is imperative that the SEC pursue the recovery from Goldman Sachs of any fraudulently obtained AIG payments.”

The lawmakers’ demand adds pressure on New York-based Goldman Sachs as European politicians increase scrutiny of the bank. Prime Minister Gordon Brown called yesterday for a probe by the U.K. Financial Services Authority and Germany’s financial regulator asked the SEC for details of its suit.

Goldman Sachs failed to disclose to investors of a CDO called Abacus 2007-AC1 that hedge fund Paulson & Co. helped pick the underlying assets and bet against the security, according to the SEC suit. The SEC charges are “completely unfounded in law and fact,” Goldman Sachs said on April 16.

John Nester, a spokesman for the SEC, didn’t immediately return a call seeking comment. Mark Herr, a spokesman for New York-based AIG, declined to comment.

—End Update—

I’m convinced that this situation with the SEC and Goldman Sachs is a limited hangout. Why?

No Criminal Charges Likely in AIG Collapse

Unless the AIG imbroglio is untangled, the rest of this is nonsense.

Goldman Sachs is now a household name. Disemboweling some flunky will give the crowd something to cheer about.

But who paid out on the Goldman sludge, and a whole lot of other sludge?

That’s right, make sure the curtain stays closed on that AIG sausage factory.

These aren’t the droids you’re looking for. *subtle hand gesture*

Via: Politico:

Former New York Gov. Eliot Spitzer said on Monday there are “no coincidences” in the Securities and Exchange Commission filing a lawsuit against Goldman Sachs just as Democrats are about to bring up financial regulatory reform in the Senate.

The SEC, which announced the civil suit Friday, is forbidden by law from acting in concert with the White House in choosing which cases it prosecutes and when to do so.

Asked about the timing of the SEC action during an interview Monday on CNBC, Spitzer, who prosecuted securities fraud as the state’s attorney general, said that “there’s no question the SEC is desperate to prove that it can enforce the law, desperate to bring in the great white whale.”

“This was not a coincidence,” asserted the former Democratic governor, who resigned after an affair with a prostitute became public. “There are no coincidences in this world. None.”

“It could be both a witch hunt and legitimate exercise of regulatory authority,” he added.

Asked during his regular briefing Monday whether the administration knew the charges against Goldman Sachs were coming, White House press secretary Robert Gibbs responded tersely, “The SEC is, by law, an independent agency.”