Goldman Sachs Fraud Case Watch

Is it weak and politically motivated, or is it likely to cause real problems for GS?

Conceivably, both could be true, I suppose.

Today, this-- "Goldman Sachs Messages Show It Thrived as Economy Fell"

In late 2007 as the mortgage crisis gained momentum and many banks were suffering losses, Goldman Sachs executives traded e-mail messages saying that they were making “some serious money” betting against the housing markets.

The e-mails, released Saturday morning by the Senate Permanent Subcommittee on Investigations, appear to contradict some of Goldman’s previous statements that left the impression that the firm lost money on mortgage-related investments.

In the e-mails, Lloyd C. Blankfein, the bank’s chief executive, acknowledged in November of 2007 that the firm indeed had lost money initially. But it later recovered from those losses by making negative bets, known as short positions, enabling it to profit as housing prices fell and homeowners defaulted on their mortgages. “Of course we didn’t dodge the mortgage mess,” he wrote. “We lost money, then made more than we lost because of shorts.”

In another message, dated July 25, 2007, David A. Viniar, Goldman’s chief financial officer, remarked on figures that showed the company had made a $51 million profit in a single day from bets that the value of mortgage-related securities would drop. “Tells you what might be happening to people who don’t have the big short,” he wrote to Gary D. Cohn, now Goldman’s president.

SEC Takes on Goldman Sachs!

Goldman Sachs, the Wall Street powerhouse, was accused of securities fraud in a civil lawsuit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly intended to fail.

The move was the first time that regulators had taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market.

The suit also named Fabrice Tourre, a vice president at Goldman who helped create and sell the investment.

In a statement, Goldman called the commission’s accusations “completely unfounded in law and fact” and said it would “vigorously contest them and defend the firm and its reputation.”

The focus of the S.E.C. case, an investment vehicle called Abacus 2007-AC1, was one of 25 such vehicles that Goldman created so the bank and some of its clients could bet against the housing market. Those deals, which were the subject of an article in The New York Times in December, initially protected Goldman from losses when the mortgage market disintegrated and later yielded profits for the bank.

As the Abacus portfolios in the S.E.C. case plunged in value, a prominent hedge fund manager made money from his bets against certain mortgage bonds, while investors lost more than $1 billion.

No criminal charges seen in AIG's collapse

NEW YORK (Reuters) – CBS News reported late Friday that Joseph Cassano, the former AIG executive closely linked with the giant insurer's near collapse in September 2008, will meet with U.S. Justice Department attorneys next week in what will probably end the two-year criminal investigation into the company -- with no criminal charges likely to be filed.

AIG received a $182 billion federal bailout during the height of Wall Street's liquidity crisis in September 2008, when regulators feared that AIG's massive losses from complex transactions could crash the global financial system.

"Sources tell CBS News that the criminal case against Cassano - once called 'the Man who Crashed the World' - has 'hit a brick wall,'" the network said in an exclusive story published on its website.

Federal investigators have found no evidence that Cassano lied to his bosses or shareholders about AIG's financial problems, sources told CBS News, according to the exclusive story posted online.