Germany to Weigh Action on Goldman

Discussion in 'Wall St. News' started by ASusilovic, Apr 17, 2010.

  1. Germany said it will ask the Securities and Exchange Commission for information in a case in which Goldman Sachs Group Inc. is accused of defrauding investors, potentially as a prelude to legal action.

    "First we must ask for the documents, then evaluate [them] and then decide about legal steps," said a spokesman for German Chancellor Angela Merkel, confirming a report in German newspaper Welt am Sonntag on Saturday.

    The U.S. government alleges Goldman Sachs sold mortgage investments without telling buyers they were crafted with input from a client who was betting against them.

    Germany's interest in the case stems from the fact that German lender IKB Deutsche Industriebank AG bought a significant amount of the collateralized debt obligations in question, contributing to IKB's heavy losses on U.S. mortgage-related securities. Those losses led to a €3.5 billion ($4.73 billion) bailout of IKB in mid-2007, with most of the money coming from IKB's major shareholder, German state bank KfW.

    IKB's near-failure marked the start of an escalating banking crisis in Germany in 2007, which found that numerous state and private-sector banks in Europe's biggest economy had invested and lost heavily in U.S. mortgage-related securities. The losses undermined German officials' claims that the subprime-mortgage crisis was a U.S. problem, and forced Germany to announce a €500 billion bailout of its banking sector in October 2008.