Yesterday, the SEC filed a lawsuit against Goldman Sachs for selling collateralized debt obligations (the CDOs I referred to in my previous post) without properly informing the investors of the risks. They have emails and other communications between Goldman and the hedge fund Paulson & Company where both parties knew they were creating really risky CDOs and then selling them to the market as triple-A rated securities.
I hope the fact that the SEC filed the suit (rather than settling) means that they have a solid case. It will be very hard to prove intent, even with ‘smoking gun’ emails.
Whether or not they win or lose the suit, we should prosecute Goldman and these hedge funds in the court of public opinion. It is clear that they value their own bonuses and bottom lines over the security and health of their customer’s investments. I will never invest a dime with these companies, even if they are the last ones standing.