No Charges For Goldman Sachs On Abacus
During the height of the housing bubble, Goldman Sachs had created collateralized-debt obligations called Abacus, which were tied to subprime mortgage-backed securities, which it sold to its investors and subsequently bet against as an institution. The bank profited on its short bets but caused many of its clients to take losses. More controversially, a hedge fund, Paulson & Co., had participated in the selection process in putting together these Abacus securities, and took a short position itself along with Goldman, making windfall profits while Americans were losing their homes across the country.
In its Thursday statement, the Justice Department made sure to point out "that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time." Goldman had agreed to a settlement with the Securities and Exchange Commission in 2010 for $550 million, but did not admit any wrongdoing. With the continued absence of bank regulations with real punitive power, settlements and not prosecutions will likely be the punishment for financial shenanigans, even those as unethical and distasteful as the Abacus scheme.
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