Tweet
Gordon Brown has called for a "special investigation" into Goldman Sachs after reports that the bank is to pay £3.5bn in bonuses.Speaking on the BBC's Andrew Marr Show the Prime Minister described the situation as one of "moral bankruptcy".
His criticism follows allegations by the Securities and Exchange Commission in US that Goldman defrauded investors during the sub-prime housing crisis.
Goldman strongly rejected the claims as wrong "in fact and law".
Mr Brown said that the UK Financial Services Authority should launch an immediate inquiry in co-operation with the US regulator, the Securities and Exchange Commission (SEC).
The Sunday Times reported that the bank was set to pay out £3.5bn in bonuses to its staff worldwide - including almost £600m to 5,500 London-based employees - for just three months work.
On Friday, the SEC issued civil charges against Goldman that it failed to disclose conflicts of interest during the marketing of sub-prime mortgages in which investors lost $1bn.
Mr Brown said that the issue underlined the need for further reform of the international banking system. "I am shocked at this moral bankruptcy. This is probably one of the worst cases that we have seen," he said.
"Hundreds of millions of pounds have been traded here and it looks as if people were misled about what happened. I want the Financial Services Authority to investigate it immediately."
Charges
On Friday, the SEC issued charges against Goldman and one of its London-based vice presidents, Fabrice Tourre.
The SEC says Goldman failed to disclose "vital information" that one of its clients, Paulson & Co, helped choose which securities were packaged into the mortgage portfolio.
These securities were sold to investors in 2007.
But Goldman did not disclose that Paulson, one of the world's largest hedge funds, had bet that the value of the securities would fall.
The SEC said: "Unbeknownst to investors, Paulson... which was posed to benefit if the [securities] defaulted, played a significant role in selecting which [securities] should make up the portfolio."
"In sum, Goldman Sachs arranged a transaction at Paulson's request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests," said the Commission.
Housing collapse
The SEC alleges that investors in the mortgage securities, packaged into a vehicle called Abacus, lost more than $1bn (£650m) in the US housing collapse.
Mr Tourre was principally behind the creation of Abacus, which agreed its deal with Paulson in April 2007, the SEC said.
The Commission alleges that Mr Tourre knew the market in mortgage-backed securities was about to be hit well before this date.
The SEC's court document quotes an email from Mr Tourre to a friend in January 2007. "More and more leverage in the system. Only potential survivor, the fabulous Fab[rice Tourre]... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!"
Goldman was not immediately available for comment on Mr Brown's criticisms.
On Friday, the bank, said "The SEC's charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation."
The firm said that, rather than make money from the deal, it lost $90m.
The two investors that lost the most money, German bank IKB and ACA Capital Management, were two "sophisticated mortgage investors" who knew the risk, Goldman said.
And nor was there any failure of disclosure, because "market makers do not disclose the identities of a buyer to a seller and vice versa."
Calls to Mr Tourre's office were referred to the Goldman press office. Paulson has not been charged.
Asked why the SEC did not also pursue a case against Paulson, Enforcement Director Robert Khuzami told reporters: "It was Goldman that made the representations to investors. Paulson did not."
The firm's owner, John Paulson - no relation to former US Treasury Secretary Henry Paulson - made billions of dollars betting against sub-prime mortgage securities.
In a statement, Paulson & Co. said: "As the SEC said at its press conference, Paulson is not the subject of this complaint, made no misrepresentations and is not the subject of any charges."This article is from the BBC News website. ? British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.
His criticism follows allegations by the Securities and Exchange Commission in US that Goldman defrauded investors during the sub-prime housing crisis.
Goldman strongly rejected the claims as wrong "in fact and law".
Mr Brown said that the UK Financial Services Authority should launch an immediate inquiry in co-operation with the US regulator, the Securities and Exchange Commission (SEC).
The Sunday Times reported that the bank was set to pay out £3.5bn in bonuses to its staff worldwide - including almost £600m to 5,500 London-based employees - for just three months work.
On Friday, the SEC issued civil charges against Goldman that it failed to disclose conflicts of interest during the marketing of sub-prime mortgages in which investors lost $1bn.
Mr Brown said that the issue underlined the need for further reform of the international banking system. "I am shocked at this moral bankruptcy. This is probably one of the worst cases that we have seen," he said.
"Hundreds of millions of pounds have been traded here and it looks as if people were misled about what happened. I want the Financial Services Authority to investigate it immediately."
Charges
On Friday, the SEC issued charges against Goldman and one of its London-based vice presidents, Fabrice Tourre.
The SEC says Goldman failed to disclose "vital information" that one of its clients, Paulson & Co, helped choose which securities were packaged into the mortgage portfolio.
These securities were sold to investors in 2007.
But Goldman did not disclose that Paulson, one of the world's largest hedge funds, had bet that the value of the securities would fall.
The SEC said: "Unbeknownst to investors, Paulson... which was posed to benefit if the [securities] defaulted, played a significant role in selecting which [securities] should make up the portfolio."
"In sum, Goldman Sachs arranged a transaction at Paulson's request in which Paulson heavily influenced the selection of the portfolio to suit its economic interests," said the Commission.
Housing collapse
The SEC alleges that investors in the mortgage securities, packaged into a vehicle called Abacus, lost more than $1bn (£650m) in the US housing collapse.
Mr Tourre was principally behind the creation of Abacus, which agreed its deal with Paulson in April 2007, the SEC said.
The Commission alleges that Mr Tourre knew the market in mortgage-backed securities was about to be hit well before this date.
The SEC's court document quotes an email from Mr Tourre to a friend in January 2007. "More and more leverage in the system. Only potential survivor, the fabulous Fab[rice Tourre]... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!"
Goldman was not immediately available for comment on Mr Brown's criticisms.
On Friday, the bank, said "The SEC's charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation."
The firm said that, rather than make money from the deal, it lost $90m.
The two investors that lost the most money, German bank IKB and ACA Capital Management, were two "sophisticated mortgage investors" who knew the risk, Goldman said.
And nor was there any failure of disclosure, because "market makers do not disclose the identities of a buyer to a seller and vice versa."
Calls to Mr Tourre's office were referred to the Goldman press office. Paulson has not been charged. Asked why the SEC did not also pursue a case against Paulson, Enforcement Director Robert Khuzami told reporters: "It was Goldman that made the representations to investors. Paulson did not."
The firm's owner, John Paulson - no relation to former US Treasury Secretary Henry Paulson - made billions of dollars betting against sub-prime mortgage securities.
In a statement, Paulson & Co. said: "As the SEC said at its press conference, Paulson is not the subject of this complaint, made no misrepresentations and is not the subject of any charges."This article is from the BBC News website. ? British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.