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Inside Washington (04/16/2010)
* WASHINGTON (4/19/10)--The U.S. Securities and Exchange Commission (SEC) broke new ground Friday when it filed suit against Goldman Sachs, charging that the bank devised a mortgage investment--called Abacus 2007-AC1--that was created to fail. The SEC accused Goldman Sachs of securities fraud in a civil suit. It charges that Abacus 2007-AC1 was among a number of deals created to allow the bank and special clients to profit by betting against the housing market. (The New York Times April 16) The case represents the first time a regulator has taken action against a deal that enabled investors to cash in on the housing market collapse, a collapse that sent shock waves through much of the U.S. economy … * WASHINGTON (4/19/10)--The Government Accountability Office (GAO) is questioning regulators’ use of a systemic risk exception as a reason to create government programs to help big banks during the financial crisis. The exception could weaken market participants’ desire to properly manage risk if they rely on emergency action in the future, said GAO (American Banker April 16). Legislation that would allow the government to wind down a large financial company could solve the problem, the GAO said in a report released Thursday. The exception--which needs to be approved by the Federal Deposit Insurance Corp.--was used five times during the financial crisis ... * WASHINGTON (4/19/10)--Sen. Carl Levin (D-Mich.) released a report charging that the Office of Thrift Supervision (OTS) was more focused on blocking the Federal Deposit Insurance Corp. (FDIC) from taking over Washington Mutual than it was regulating the bank (American Banker April 19). The report argues that the agency ignored examiners’ findings about Wamu’s risk-taking. Another report from the inspectors general of the FDIC and Treasury concluded that the FDIC and OTS could have done more to help Wamu. Levin said OTS did not allow the FDIC to access documents and rebuffed the agency’s critical view of the bank’s condition. Instead, the OTS fought a “turf war,” Levin said. The FDIC is less to blame for the poor oversight, but could have acted more “vigorously,” he added...


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