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City trader linked to Goldman Sachs case as regulators track sub-prime deals | Business | The Observer

The Financial Services Authority is closely monitoring developments at Goldman Sachs after one of its London-based traders was implicated by US authorities in a $1bn fraud case that hit Royal Bank of Scotland.

The link gives a domestic dimension to the lawsuit filed by the US Securities and Exchange Commission against Goldman Sachs. The case is the biggest sign yet that regulators on both sides of the Atlantic intend to pursue the architects of the exotic financial instruments that helped to cause the credit crunch. It is alleged that the American bank defrauded investors by encouraging firms to take bets on sub-prime mortgages it knew would turn sour.

The Liberal Democrat Treasury spokesman, Lord Oakeshott, said if the claims proved true it would demonstrate "the extent greedy bankers would go to, to pull the wool over the eyes of their customers and the regulator".

The accusations are levelled at Goldman Sachs, as well as French employee Fabrice Tourre, 31, who is now an executive director in its London office.

The US financial watchdog obtained emails sent to a friend in which Tourre jokes: "The whole building is about to collapse... only potential survivor, the fabulous Fab [Fabrice Tourre]... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!"

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman
by dvx (dvx.clt št gmail dotcom) on Sun Apr 18th, 2010 at 11:55:12 AM EST
[ Parent ]
This RBS?

Royal Bank of Scotland (RBS.L) was forced to reveal yesterday that it has lent $3.47bn (£2.34bn) to Lyondell Chemical, the bankrupt US chemicals company. Analysts warned that RBS, the biggest lender to Lyondell, was at risk of losing a sizeable proportion of the money.

RBS inherited the loans from its ill-fated acquisition in 2007 of ABN Amro's investment bank. The loans are thought to include $1.6bn worth of lower-ranked credit that could lose all of its value. ABN Amro is listed as Lyondell's biggest secured creditor in documents filed in the US bankruptcy court in New York.

The potential loss is the latest banana skin for RBS linked to the £10bn ABN Amro deal. RBS's pursuit of the Dutch bank during the financial meltdown helped to seal the fate of Sir Fred Goodwin, who quit as chief executive late last year. Last month, RBS revealed it could lose £400m from Bernard Madoff's alleged $50bn fraud in the US because of deals done by ABN.


GS victim. Really?

Diversity is the key to economic and political evolution.

by Cat on Mon Apr 19th, 2010 at 10:39:24 AM EST
[ Parent ]
Must be the other RBS.

"Of course I feel let down by RBS," Mr Hamilton said, before adding: "Is there a person in the whole of Scotland who doesn't feel let down by RBS? We have trusted them for generations. I've been a customer, I'm sure, for 60 years."

There was at least one call on Mr Hamilton's website yesterday for a "class action" against RBS with other aggrieved customers joining him in a major action against the bank. Politicians admitted Mr Hamilton's claim could have "enormous implications", and may pave the way for "a speedy nationalisation".

SNP MSP Alex Neil said: "I think the bank will be nationalised anyway, but Ian is making a substantial and justified point that there are responsibilities the banks have to accept in terms of their actions and in terms of their customers."


Diversity is the key to economic and political evolution.
by Cat on Mon Apr 19th, 2010 at 10:44:17 AM EST
[ Parent ]
Victim, the press reports, victim really?

"Cherie Blair, the wife of former British Prime Minsiter Tony Blair, has been hired to sue the Royal Bank of Scotland. Two UK pension funds have asked the US courts to compensate them for the losses they incurred when the bank 'falsely reassured' investors the bank was in good health when it was 'effectively insolvent'." scrapbook

"Neil Moorhouse, a spokesman for RBS, said he was "unaware of the case" and couldn't provide further comment. "Bloomberg

Diversity is the key to economic and political evolution.

by Cat on Mon Apr 19th, 2010 at 11:04:32 AM EST
[ Parent ]
I can't really say I feel bad for the shareholders, especially not big ones like these pension funds. Big owners usually have their own people as members of the board to keep an eye on things, and even if they don't someone should have told them that share ownership carries with it the risk of losses. Past performance is no guarantee of future performance. If you buy shares in a company run by crooks, well, tough luck. Take a closer look at management next time.

Ergo, they just seem like sore losers.

If anyone should be going to court, it's the management for RBS for providing false information to the markets. Long jail terms for them is fine by me, but stupid shareholders should not be compensated. If they don't like risk they should put their money in German sovereign debt.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Mon Apr 19th, 2010 at 11:48:51 AM EST
[ Parent ]
There are stupid shareholders and there are stupid shareholders. Over the past 2 years I've read of some pretty awful crimes perpetrated by fiduciaries e.g. real estate agents, and other money managers, engaged by clubs, pension funds, municipalities. Some have been convicted --mostly the ponzis-- but I guess, stupid shareholders are given to understand the test of harms through civil litigation is more easily satisfied than those proscribed by criminal prosecution.

Which is a pity. Civil penalty cannot stop such people. Limited liability such as it is, the entity that harbors the gumbas may bankrupt. But they prevail, hang a new, teflon shingle burnished with self-evident chutzpah, and draw the other "outguessing" shareholders that got away.

I'm not convinced as yet any prime dealer employee will ever face prison, although in the US, states' attorneys general may arrest and charge individuals at any time. DoJ doesn't require SEC permission to prosecute.

Diversity is the key to economic and political evolution.

by Cat on Mon Apr 19th, 2010 at 04:12:40 PM EST
[ Parent ]


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