After a year-long investigation, the Justice Department said Thursday that it will not bring charges against Goldman Sachs Group Inc. or any of its employees for financial fraud related to the mortgage crisis.Separately, the SEC closed its investigation of a Goldman mortgage deal without pursuing any enforcement actions. The New York Times reports:
In a statement released Thursday, the Justice Department said "the burden of proof" couldn't be met to prosecute Goldman criminally based on claims made in an extensive report prepared by a U.S. Senate panel that investigated the financial crisis.
"Based on the law and evidence as they exist at this time, there is not a viable basis to bring a criminal prosecution with respect to Goldman Sachs or its employees in regard to the allegations set forth in the report," the statement read.
The Justice Department reserved the right to bring charges in the future if new evidence emerges.
Goldman Sachs disclosed that an investigation into a $1.3 billion subprime mortgage deal has ended without an enforcement action.
The Securities and Exchange Commission‘s decision to forgo action is an about-face for the federal regulator. In February, the S.E.C. notified Goldman that it planned to pursue a civil enforcement action over the deal, a package of subprime mortgages in Fremont, Calif., that the bank sold to investors in 2006.
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.
On Monday, the bank learned that it was successful. Goldman was “notified by the S.E.C. staff that the investigation into this offering has been completed,” the bank said in a quarterly filing released on Thursday, “and that the staff does not intend to recommend any enforcement action.”
The Associated Press described the SEC action as a coup for Goldman:
NEW YORK — The Securities and Exchange Commission has decided not to file charges against Goldman Sachs over a $1.3 billion subprime mortgage portfolio.And here is some reporting from the Financial Times, attempting to explain the timing of this action, and the potential for other enforcement actions before the expiration of the statute of limitations and the fall elections:
The SEC’s decision is a coup for Goldman, which has paid fines after other mortgage-related investigations.
The SEC’s decision to drop the investigation comes as authorities are approaching a statute of limitations deadline for mortgage securities issued before 2007.
Most of the deals were created in the boom years of 2006 and 2007, meaning 2012 will be the regulators’ last chance to file charges alleging mis-selling unless they extend the timeframe.
People familiar with the matter say the SEC is asking companies and individuals to sign “tolling agreements” to extend the agency’s ability to bring a case after the five year statute of limitations expires. Lawyers involved in investigations expect to see more cases by the November election, given the president’s announcement of a residential mortgage-backed securities taskforce announced in January.