It only took a two-year Senate investigation into the mortgage crisis and 5,901 pages of confidential e-mails and documents to figure out what everyone already knew: Investment banks sold collateralized debt obligations (of risky mortgage loans) without letting investors know that it sure would help Wall Street out if the value of those CDOs plummeted. Although the investigation wasn’t able to yield evidence of outright fraud, the 640-page report showed “Wall Street in gritty, day-to-day detail, angling to profit from a booming mortgage market, and then scrambling to cope with its collapse,” reports The Wall Street Journal. Senator Carl Levin saved his soundbite for one firm in particular, telling reporters, “In my judgment, Goldman clearly misled their clients and they misled the Congress.” For those wondering why there were no prosecutions for power players who set off the financial crisis, the report’s findings might be the tipping point.
Levin says he wants the Justice Department and the SEC to investigate whether Goldman violated the law and whether Lloyd Blankfein and other employees could be tried for perjury for denying under oath that “Goldman Sachs took a financial position against the mortgage market solely for its own profit,” reports Bloomberg. Hey, grin your way through a congressional hearing and your face starts to look like a bull’s-eye.
The panel’s report also implicated Deutsche Bank AG. But the juiciest stuff came from Lloyd’s corner. In search of investors to buy those CDOs, a Goldman executive sent out an e-mail in 2007 about a dupe in Australia under the subject line “utopia”: “I think I found white elephant, flying pig, and unicorn all at once.” Who wants to take the bet that Goldman will still find a way to come out of this mess by paying off another settlement that amounts to tacking on a zero to the amount they pay their top executives?
Senate Report Lays Bare Mortgage Mess [WSJ]
Goldman Sachs Misled Congress After Duping Clients: Levin [Bloomberg]
In Financial Crisis, No Prosecutions of Top Figures [NYT]