Britain and Germany demand Goldman Sachs probe
Britain joined forces with Germany yesterday in calling for a probe of Goldman Sachs, after the Wall Street's largest investment bank was charged last week with alleged fraud by US regulators.
British Prime Minister Gordon Brown said he wants the Financial Services Authority to open an inquiry, declaring he was "shocked" at the "moral bankruptcy" indicated in the lawsuit by the US Securities and Exchange Commission (SEC).
The German financial regulator has asked the SEC for details on the suit, a spokesman for Chancellor Angela Merkel said.
"This is probably one of the worst cases we've seen," Mr Brown said on the BBC television yesterday. "It looks as if people were misled about what happened. The banks are still an issue. They are a risk to the economy."
The investigations widen the threat to the New York-based bank, which last Friday denied wrongdoing. The US regulator accused Goldman Sachs of fraud tied to the marketing of a subprime mortgage product -- through financial derivatives called collateralised debt obligations (CDOs) -- that contributed to the financial crisis.
"We will see politicians throughout the world piling [pressure] on Goldman Sachs," said Scott Moeller, a former investment banker now teaching at Cass Business School in London. "Now they have vulnerability. Everyone and anyone, especially politicians are going to be try to make hay with this one." Goldman Sachs and the British FSA declined to comment. (Bloomberg)