Senate Probes Goldman Sachs and Other Major Banks for Meltdown Fraud

Goldman Sachs (NYSE:GS) and Deutsche Bank AG (NYSE:DB) were issued subpoenas by a U.S. Senate panel seeking evidence of fraud in the 2008 mortgage-market meltdown, the WSJ reports, citing people familiar with the matter.

The direction of the congressional investigation, notes the Journal, is focused on whether internal communications show executives at the banks had private doubts on the soundness of the mortgage-related securities they were putting together, and if these securities, which  played a big role in accelerating last year’s financial crisis, were as financially sound as their public pronouncements suggested.

The people familiar with the situation told the Journal that the Senate panel also has issued a subpoena to Washington Mutual Inc, which is now mostly owned by JPMorgan Chase & Co. (NYSE:JPM). The paper also said it appears likely that several other financial institutions may have also received subpoenas from the Senate Permanent Subcommittee on Investigations, headed by Senator Carl Levin (D., Mich.).

The subpoenas are the latest in a series of moves by Congress to trace the roots and the implications that led to the financial crisis. Implications that progressively started to build in the repo market where MBS and other assets were used as collateral for loans. Because of the collateralization, these loans were perceived as  safe, but the securities turned out to be way more riskier than borrowers and lenders had thought, consequently creating the conditions of an impending disaster.

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About Ron Haruni 1070 Articles
Ron Haruni is the Co-Founder & Editor in Chief of Wall Street Pit.

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