Goldman Sachs fined $550m

Fined for $550m

If you mislead investors, expect to pay the price. For Goldman Sachs, that price is a record $550 million fine after their marketing of mortgage investments led to the crash of the US housing market.

The fine, that was issued by US regulator the Securities and Exchange Commission, will see the UK's Royal Bank of Scotland receive $100 million in compensation, despite it losing $840 million in investments during the crash and now 84 percent owned by the tax payers.

German bank IKB Deutsche Industriebank will receive $150 million, while it is reported $300 million will go to the US Treasury.

In their review, the Securities and Exchange Commission said allegations against Goldman Sachs were based upon the fact that that mortgage-backed securities sales were arranged without the bank disclosing in its marketing material that hedge funds were betting against those same investments.

Despite the fine, Goldman Sachs has still not admitted its guilt or denied it, but said that the decision was "the right outcome for our firm, our shareholders and our clients".

Banking scandal

Goldman Sachs has also stated it admits some of its marketing material "contained incomplete information", and also neglected to disclose the role of hedge fund Paulson & Co, headed up by John Paulson.

In a statement, the disgraced firm said, "We understand that the SEC staff also has completed a review of a number of other Goldman Sachs mortgage-related collateralized debt obligation transactions and does not anticipate recommending any claims against Goldman Sachs or any of its employees with respect to those transactions based on the materials it has reviewed. We recognize that, as is always the case, the SEC has reserved the right to reopen those matters based on new information."

However despite the record fine, there are concerns that the banking giant has gotten off easy, especially as it made a profit of $3.5 billion in the first three months of the year.

Shadowy deals

The decision comes the same week as President Obama puts the final touches to a historic Wall Street overhaul bill that will stop the "shadowy deals" that helped trigger the financial crisis. The President said the law, which he is expected to sign next week, would build an "innovative, creative, competitive" economy.

It is the broadest overhaul of US financial rules since the Great Depression and has been approved by Congress. The legislation, which is designed to rein in the risky practices blamed for causing the financial crisis, was passed by 60 votes to 39.

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