>>>
>>> now to the economy, the
mortgage
meltdown that helped bring on the great recession continues to reverberate, now the
government
has accused the
wall street
firm
goldman
sachss of defrauding efforts. we'll get the
story
from
nbc
's
lisa myers
.
>>
reporter: essentially gold man
sacks
is accused of helping rig the game against investors. in aifl complaint, the sec accused the firm and one of its
vice presidents
of knowingly defrauding investors.
>>
any time a storied firm like
goldman
-
sachs
which has one of the finest reputations on the
government
is charged with fraud by the
u.s. government
, it's an important, not just for that firm, but for the
financial system
.
>>
reporter: here's what the sec is charges, that gold man worked with a prom vent
hedge fund
to create a package of risky subprime mortgages that was designed to nail. the
hedge fund
paulson
and
company
is owned by billionaire
john paulson
who's not related to former treasury secretary
hank paulson
.
john paulson
himself made an estimated $3.7 billion in
2007
, largely by betting against the subprime market. he and his firm are not accused of wrong doing. here's what the sec claimed happened.
goldman
-
sachs
was pulling together a bucket of subprime mortgages to sell to investors. it allowed the
hedge fund
to pick the worst mortgages to go into the bucket which means the investment was likely to fail. gold man
sacks
then helped the
hedge fund
bet against the bucket.
goldman
-
sachs
then labeled the bucket a good investment and sold the supposedly good investments to others, telling them the hedge had already investigated. but gold man didn't tell investors that the
hedge fund
was picked by the gold an earned $15
million
in fees. some say that charges as hopeful evidence of a new, more aggressive sec.
>>
the style of the sec has changed, they're harder, they're tougher and they're going to let all of the evidence hang out.
>>
reporter:
goldman
-
sachs
denied the charges saying they a are completely unfounded in law and fact. gold man says it also lost 90
million
on the deal. one former prosecutor came to
goldman
's defense.
>>
i think at the
end of the day
goldman
will be vindicated.
>>
reporter: could this lead to charges against other firms.
>>
you'll look at deals with similar profiles or any deal where disclosures were not properly made.
>>
this comes as welcome news to claims that
wall street
knowingly sold junk products which generated massive losses and helped trigger the recession.
>>
so just what does this mean for the average person? we have asked
scott
cohn of cnbc. i found myself shaking my head that the whole process of selling these bad toxic mortgages was not questionable, it's just the simple fa october that it was not disclosed?
>>
what you get at here is if these allegations are true, not only did we have a
housing
boom and all these bad mortgages that were chopped up and sold as securities, but then they were sold to other
banks
and when the
housing
boom busted then the whole system was affected. what we're saying here is that
goldman
knew these investments were bad.
>>
and investors lost a billion dollars, the investors, foreign
banks
,
insurance companies
, how did it trickle down to the rest of the us?
>>
first of all these big
banks
are invested in pension founds and we saw all of these
banks
that were failing in
2008
, the
big government
bailouts, than that's what was going on is because these kinds of securities blew up.
>>
is this all signal that the
government
is getting a
little
tougher and is now taking
names
along the way
.
>>
it does to an extent, the
government
has been embarrassed by all of this. one of the things that the sec did was to create a unit that is going to look at these kinds of structured investments. this is their first fruit that this is born, and there no doubt will be more.
>>
is anybody going to get tlou their
money
back either through a
class
-action suit or
criminal charges
?
>>
we'll see about
criminal charges
, we haven't
heard
about that yet but it certainly is a possibility if you read the complaint. whether it's
pension funds
, individuals, they now have something that they can look at, a
road map
as it were.
>>
scott
cohn,
thank you very much
.
“ ”