The Securities and Exchange Commission informed Goldman Sachs that it no longer is being investigated for mortgage-backed securities fraud, Bloomberg News reports.
The SEC probe examined the bank's disclosures made on subprime residential mortgage-backed securities. Goldman's Fremont Home Loan Trust 2006-E was part of a broader, industry-wide investigation into mortgage-backed securities.
The Department of Justice also announced today that it would not prosecute the bank or its employees in a financial fraud probe stemming from a Senate panel investigating the 2008-2009 financial crisis, AP reports.
The department and investigative agencies ultimately concluded that the burden of proof to bring a criminal case could not be met based on the law and facts as they exist at this time.
The Senate subcommittee investigation, chaired by Sen. Carl Levin (D-MI), found that Goldman Sachs sold mortgage-backed securities to investors without informing them of the risks. Meanwhile, the bank "secretly bet against the investors' positions and deceived the investors about its own positions to shift risk from its balance sheet to theirs."
Levin said during his subcommittee's investigation that he believed that Goldman executives "misled the Congress" and that Goldman "gained at the expense of their clients and they used abusive practices to do it."
In a related investigation,
NY Times reports:
The S.E.C. was examining whether Goldman misled investors into thinking the mortgage securities were a safe bet. At the time, Goldman said it would fight to convince regulators that they were mistaken.
Mission accomplished. Evidently, it was all just one big misunderstanding.
Advocates of more oversight of the financial industry are criticising the decision by the SEC, CBS News reports.
William Black, the former head federal regulator at the Federal Home Loan Board and Office of Thrift Supervision in the 1980s and 1990s and now associate professor of economics and law at the University of Missouri, criticized the SEC decision, CBS News reports.
"It is still staggering that no elite player has been prosecuted, fined, or jailed," says William Black... "There has never been a single investigation worthy of the name of any of the entities involved" in the mortgage meltdown.
[...]
"During the S&L crisis, regulators made 30,000 criminal referrals," Black said. "So far the Office of Thrift Supervision has made none. The Office of the Comptroller of the Currency has made maybe three. The [Federal Reserve] has made three, and two of those were against foreign banks."
Since the 1990s, Black said federal "agencies were told to get away from punitive actions... Instead, they needed to form partnerships with industry. Industry needed to be thought of as customers."
Previously, Goldman Sachs paid in 2010 a measly $550 million to settle civil fraud charges by the SEC that it sold a mortgage investment that was designed to collapse. The bank did not admit wrongdoing as part of the settlement.
Coinciding with with the announcement Goldman Sachs was no longer under investigation, "the investment bank also lifted its estimate of 'reasonably possible' legal losses to $3.4 billion," Reuters reports.