Monday

1st Mar 2021

EU 'following' Goldman fraud case

  • RBS was one of big losers from the Goldman investment product (Photo: Wikipedia)

The European Commission has said it is closely monitoring the latest fraud case surrounding Wall Street investment bank Goldman Sachs, as allegations of mispractise draw sharp criticism in a number of European capitals.

"This is a fraud investigation that is being carried out in the United States. We are obviously following events with great interest," said commission spokeswoman Amelia Torres on Monday (19 April).

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

The US Securities and Exchange Commission (SEC), the country's financial regulator, filed charges against Goldman late last week, accusing the company of failing to disclose full information to clients of one of its investment products, known as a collaterised debt obligation (CDO).

UK Prime Minister Gordon Brown attacked the famous bank over the weekend, accusing it of "moral bankruptcy", after the SEC listed the Royal Bank of Scotland, now 84 percent owned by British taxpayers following a series of government bail-outs, as one of the victims of the CDO at the centre of the case.

The US complaint alleges Goldman and Fabrice Tourre, a 31-year old vice president with the firm, hid from investors the fact that the hedge fund Paulson & Co had been influential in determining the composition of loans going into the CDO created by Goldman in 2007.

While most investors sought high returns from the structured finance product, Paulson placed bets that the mortgage-linked assets would fall.

Nine months after the creation of the CDO, 99 percent of its loans had been downgraded, netting $1 billion for Paulson & Co., and costing the Royal Bank of Scotland $841 million.

"Everything I find out convinces me that we have got to go in deeper, and I believe that I am the man to deal with these problems," said an election-mode Mr Brown.

Germany has also indicated its interest in the case. The country's IKB bank was an early victim of the credit crunch, losing almost the entirety of its $150 million investment in the Goldman CDO.

Chancellor Angela Merkel's spokesman, Ulrich Wilhelm, said the German regulator BaFin will ask the SEC for detailed information. "After a careful evaluation of the documents, we will examine legal steps," he said, report national media.

Analysts said the latest revelations could speed the passage of a US financial regulation bill set to hit the senate floor in the coming days, with a subsequent knock-on effect for Europe.

"Supposing the US adopts legislation before the summer, which is not impossible, this will then become the benchmark for the EU," Nicolas Véron, a financial services analyst with the Brussels-based Bruegel think-tank, told EUobserver.

EU internal market and financial services commissioner Michel Barnier is set to propose new legislation on financial derivatives this June, likely to lead to extensive debate between member states and inside the European Parliament.

France and other members of the G20 group of leading countries have pledged to regulate the $450 trillion global derivatives market by the end of 2012.

The US announcement of an investigation into Goldman last week comes on top of EU criticism earlier this year that Goldman helped Greece to hide the true extent its debt pile, using a different financial product known as a currency swap.

The bank has insisted no rules have been broken in either case.

Luxembourg tax scandal may prompt EU action

An investigation into Luxembourg's tax regime has uncovered how the Italian mafia, the Russian underworld, and billionaires attempt to stash away their wealth. The European Commission has put itself on standby amid suggestions changes to EU law may be needed.

Investigation

Portugal vs Germany clash on EU corporate tax avoidance

Portugal's taking over the EU presidency puts the tax transparency law for corporations - which has been fought over for years - to a vote in the Council of Ministers. The resistance of the German government has failed.

News in Brief

  1. China sees rapid decline in press freedom, foreign journalists
  2. UK already vaccinated more than 20m people
  3. Serbia attacks EU 'vaccine passport' idea
  4. Germany tightens controls on French border
  5. Pfizer vaccine possibly less effective in obese people
  6. Iran says it will not attend talks with US on nuclear deal
  7. Police injured in Irish anti-lockdown protests
  8. EU leaders restate defence 'autonomy' plan

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance
  2. UNESDAEU Code of Conduct can showcase PPPs delivering healthier more sustainable society
  3. CESIKlaus Heeger and Romain Wolff re-elected Secretary General and President of independent trade unions in Europe (CESI)
  4. Nordic Council of MinistersWomen benefit in the digitalised labour market
  5. Nordic Council of MinistersReport: The prevalence of men who use internet forums characterised by misogyny
  6. Nordic Council of MinistersJoin the Nordic climate debate on 17 November!

Latest News

  1. EU ambassador in hot water over Cuba letter
  2. 'Big Five' tech giants spent €19m lobbying EU in 2020
  3. Women fighting Covid-19 in focus This WEEK
  4. Ethiopia right of reply
  5. Time to choose on Russia: regime first or people first?
  6. Armenia 'coup' shows waning of EU star in South Caucasus
  7. 'Difficult weeks' ahead, as variants spread across EU
  8. EU top court advised to strike down Hungary's asylum policy

Join EUobserver

Support quality EU news

Join us