The Wall Street Journal
The U.K. and Germany said their financial regulators would seek information from the U.S. Securities and Exchange Commission about the case in which Goldman Sachs Group Inc. is accused of defrauding investors, in order to establish whether British and German banks were victims of wrongdoing.
The two countries count as Goldman's most important markets in Europe, and government investigations there would be another challenge for Goldman as it tries to fend off the charges in the U.S.
On Sunday, U.K. Prime Minister Gordon Brown said he would instruct the Financial Services Authority to conduct an immediate special investigation into how Goldman's alleged actions affected British banks, including the Royal Bank of Scotland Group PLC.
"There is a moral bankruptcy reflected in what I am reading about and hearing about," Mr. Brown told the BBC's Andrew Marr show.
Mr. Brown's statement came after a spokesman for German Chancellor Angela Merkel said Germany's financial regulator Bafin would ask the SEC for information as a possible prelude to legal action in Germany.
"First we must ask for the documents, then evaluate [them] and then decide about legal steps," said the chancellor's spokesman over the weekend.
A spokesman for Goldman Sachs declined to comment.
The threats of possible legal action against Goldman in Europe are a sign of the continuing anger at banks among European voters and officials, many of whom believe that Goldman and other banks, having benefited from bailouts by their respective governments, have reverted to the kind of risky trading that led to the financial crisis.
The U.S. government alleges Goldman sold mortgage investments without telling buyers they were crafted with input from a client who was betting against them.
RBS, which since the financial crisis has been majority owned by the U.K. government, was a large investor in the Goldman-constructed complex securities at the heart of the SEC case. An RBS spokesman declined to comment.
Germany's interest in the case stems from the fact that IKB Deutsche Industriebank AG bought a significant amount of the collateralized debt obligations in question, contributing to the lender's heavy losses on U.S. mortgage-related securities. Those losses led to a €3.5 billion ($4.73 billion) bailout of IKB in mid-2007, with most of the money coming from IKB's major shareholder, German state bank KfW. An IKB spokeswoman declined to comment.
IKB's near-failure marked the start of an escalating banking crisis in Germany in 2007, which found that numerous state and private-sector banks in Europe's biggest economy had invested and lost heavily in U.S. mortgage-related securities. The losses undermined German officials' claims that the subprime-mortgage crisis was a U.S. problem and forced Germany to announce a €500 billion bailout of its banking sector in October 2008.
The FSA is an independent government agency, and it isn't clear how Mr. Brown's statement will impact the U.K. regulator. A person familiar with the matter said Sunday that the FSA was monitoring the U.S. probe into Goldman and was trying to obtain additional information before deciding whether to formally open its own investigation.
In the U.K., the Goldman case is becoming a political football with too-close-to-call national elections due May 6.
The banking industry, deeply unpopular among the British public in the wake of government bailouts and lofty pay packages, has already been a theme in the elections. Politicians from all parties have been vying to outdo each other with promises to tighten control of banks' risky activities. Goldman's alleged actions, especially at the expense of a bank that later needed a taxpayer bailout, are likely to add fuel to the fire.
On Sunday, U.K. Prime Minister Gordon Brown said he would instruct the Financial Services Authority to conduct an immediate special investigation into how Goldman's alleged actions affected British banks, including the Royal Bank of Scotland Group PLC.
"There is a moral bankruptcy reflected in what I am reading about and hearing about," Mr. Brown told the BBC's Andrew Marr show.
Mr. Brown's statement came after a spokesman for German Chancellor Angela Merkel said Germany's financial regulator Bafin would ask the SEC for information as a possible prelude to legal action in Germany.
"First we must ask for the documents, then evaluate [them] and then decide about legal steps," said the chancellor's spokesman over the weekend.
A spokesman for Goldman Sachs declined to comment.
The threats of possible legal action against Goldman in Europe are a sign of the continuing anger at banks among European voters and officials, many of whom believe that Goldman and other banks, having benefited from bailouts by their respective governments, have reverted to the kind of risky trading that led to the financial crisis.
The U.S. government alleges Goldman sold mortgage investments without telling buyers they were crafted with input from a client who was betting against them.
RBS, which since the financial crisis has been majority owned by the U.K. government, was a large investor in the Goldman-constructed complex securities at the heart of the SEC case. An RBS spokesman declined to comment.
Germany's interest in the case stems from the fact that IKB Deutsche Industriebank AG bought a significant amount of the collateralized debt obligations in question, contributing to the lender's heavy losses on U.S. mortgage-related securities. Those losses led to a €3.5 billion ($4.73 billion) bailout of IKB in mid-2007, with most of the money coming from IKB's major shareholder, German state bank KfW. An IKB spokeswoman declined to comment.
IKB's near-failure marked the start of an escalating banking crisis in Germany in 2007, which found that numerous state and private-sector banks in Europe's biggest economy had invested and lost heavily in U.S. mortgage-related securities. The losses undermined German officials' claims that the subprime-mortgage crisis was a U.S. problem and forced Germany to announce a €500 billion bailout of its banking sector in October 2008.
The FSA is an independent government agency, and it isn't clear how Mr. Brown's statement will impact the U.K. regulator. A person familiar with the matter said Sunday that the FSA was monitoring the U.S. probe into Goldman and was trying to obtain additional information before deciding whether to formally open its own investigation.
In the U.K., the Goldman case is becoming a political football with too-close-to-call national elections due May 6.
The banking industry, deeply unpopular among the British public in the wake of government bailouts and lofty pay packages, has already been a theme in the elections. Politicians from all parties have been vying to outdo each other with promises to tighten control of banks' risky activities. Goldman's alleged actions, especially at the expense of a bank that later needed a taxpayer bailout, are likely to add fuel to the fire.
