American values have dropped sharply after the complaint filed by the U.S. stock market authority against the bank misled investors. On Friday, April 16,U.S. stocks ended down sharply after the fraud charges brought by the American Stock authority cons bank Goldman Sachs has prompted investors to take profits after six sessions of gains. The news of Goldman Sachs has added to the disappointment caused by the quarterly results, though better than expected, Google and the unexpected drop in consumer sentiment.
European shares in freefall
The Dow Jones lost 1.13% or 125.91 points at 11,018.66 points, the Standard & Poor’s 500 index 1.61% or 19.54 points to 1192.13 points and the Nasdaq Composite 1.37 % or 34.43 points to 2481.26 points. For the week, the Dow is up 0.2%, as the Nasdaq (+1.1%) but the S & P lost 0.2%.
Goldman Sachs has been charged with fraud Friday by the U.S. financial markets authority, accusing it of having misled investors during the design and marketing of complex financial products linked to mortgages subprime. As an action, Goldman Sachs tumbled nearly 13%, to 160.70 dollars.
The information has been unscrewed all financial. The KBW index of bank ended in decline of 3.46%. Morgan Stanley has lost 5,6% to 29.16 dollars. Similarly, Bank of America fell 5.5% to 18.41 dollars despite a better than expected.
An operation that would cost over one billion dollars
According to the complaint of the U.S. stock market watchdog, the Securities and Exchange Commission (SEC), the manager of hedge funds, “Paulson & Co (hedge funds), led by billionaire John Paulson has worked with Goldman Sachs to create a CDO ( “collateralized debt obligations), called Abacus while focusing on the declining value of the instrument. This would cost over one billion dollars (741 million euros) to investors.
The authority of U.S. financial markets adds that Tourre Fabrizio, vice president of Goldman Sachs, is primarily responsible for the creation of Abacus and accuses him personally for fraud.
Paulson is however not charged. “Goldman has made presentations to investors, not Paulson,” he said during a conference call Robert Khuzam, head of the rules of the SEC. The SEC has received the cooperation of a former manager of Paulson & Co, Paolo Pellegrini, it was learned from a source close to the matter.
Goldman Sachs, wants to defend his reputation, has however indicated that it vigorously contest the charges with the SEC, as entirely unfounded.
The complaint, filed in Manhattan federal court, marked a dramatic development efforts of regulators to determine the responsibilities of individuals and businesses who played a role in financial crisis. It also occurs when U.S. lawmakers debating the reform of financial regulation in Congress.
“Fraud is a huge indictment”
“Fraud is a huge accusation. This could really cripple Goldman,” said Rob Stein, Astor Asset Management in Chicago. “This proves that the financial measures are not the compartment to be for the next stage of recovery.”
Google has lost 7.6% to 550.145 million. The Internet search engine said Thursday, up 23%, above expectations, its sales in the first quarter, some investors accustomed to much better performance yet, appearing disappointed.
Another great value, General Electric has dropped 2.7% to 18.97 dollars. The conglomerate has yet posted a profit above expectations for the first quarter and found it possible to revise upward its forecast for an annual output unchanged in 2010.
Another subject to profit-taking incentives, the morale of American households suffered in April, an unexpected degradation can be explained by the outlook still bleak in terms of income and employment.
In this context, investors have not reacted to increases in housing starts and building permits last month, which respectively reached their highest level since November and October 2008.