Goldman Sachs shares are currently down 12% today following an SEC lawsuit claiming Goldman committed subprime fraud. The SEC suit alleges Goldman was paid by hedge fund Paulson & Co. to create and market a subprime mortgage derivative product sold under the name Abacus, then Paulson & Co. shorted it while Goldman was marketing it to investors. The full suit is below.
Goldman will duke this one out, probably successfully if past is precedent on Wall Street outlasting or outsmarting regulators. But the public’s generally ‘guilty’ verdict helps fuel the SEC as they defend their claim. Plus they have more cases against more firms in their pipeline. And this kind of case draws support from voters and politicians … so maybe it will help push toward some revised, relevant financial regulations. But for now, here’s the real truth below all the headline hysteria.