Looks like the cat is finally out of the bag. Reuters is reporting that 2 customers of Goldman Sachs have sued the company over $3.6 billion in toxic loans knowing that the securities were risky and that the market was about to crash. It is any wonder considering that Paulson worked with Goldman Sachs before he worked in the Department of the Treasurer. I’m not saying there was any insider information swapped, or that Paulson is out to help the old boys, but you can’t help wonder. Full announcement below.
Two The Goldman Sachs Group, Inc.’s Customers Sue Firm Over ARS-Reuters
Reuters reported that two customers of The Goldman Sachs Group, Inc. sued the Company, claiming it convinced them to keep buying risky auction rate securities when it knew the market was collapsing. The lawsuit filed in U.S. District Court in Manhattan said that between July 2006 and August 2007, Goldman sold $3.6 billion of student loan ARS to Bankruptcy Management Solutions Inc and Ocwen Financial Corp. Goldman represented to BMS and Ocwen that the securities were appropriate for those companies’ investment portfolios which, as Goldman knew or consciously and recklessly disregarded, were restricted to safe, highly-liquid investments. At the time of the ARS market collapse in February this year, BMS and Ocwen held a combined $236 million in Goldman-brokered student loan auction rate securities, the lawsuit said. These were ARS based on student loans typically supported by government guarantees.
