Senate Preparing Final Report On Mortgage Crisis
According to a Sunday report in the Wall Street Journal, the Senate will soon release its findings from a probe into the US mortgage meltdown that sparked a global financial crisis, and analysts say that Goldman Sachs is expected to take criticism for its role.
The Senate Permanent Subcommittee on Investigations, which subpoenaed executives from Goldman and other large US banks last year, is preparing its final report on the matter. Citing sources familiar with the case, the Journal said the report is expected to release emails from a number of securities firms that sold or developed subprime mortgages and financial vehicles including collaterized debt obligations, or CDOs.
CDOs were widely used by Wall Street firms to bet against the housing market, and when it collapsed, many top CDOs were downgraded to "junk" status, causing their values to plummet. Goldman, according to the Wall Street Journal report, created CDOs in 2006 and 2007 to limit its exposure to the US housing market, and allegations have surfaced that the bank made large bets against the housing market while selling bullish positions to groups that did not expect the market to collapse.
Sources close to the investigation have said that both Goldman and Deutsche Bank, two of the banks most criticized of misleading investors in the housing market, will draw significant scrutiny in the Senate's findings. Back in January, Goldman officials said the bank was renewing its commitment to its client interests, and laid out a series of 39 recommendations to increase the transparency of its business practices, with particular attention on its own private trading and possible conflicts of interest.