Congressman Rick Larsen's Online Office

Washington, D.C. — Today, U.S. Representative Rick Larsen (WA-02) called for the Securities and Exchange Commission (SEC) to conduct a greater investigation into Goldman Sachs and other investment banks by sending the following letter to Mary Schapiro, Chairwoman of the U.S. Securities and Exchange Commission.

“Nearly 100,000 hardworking families in Washington state have lost their homes or fallen into bankruptcy because big banks on Wall Street gambled with their futures by selling risky financial products,” said Rep. Larsen. “I urge the SEC to broaden their investigation into Goldman Sachs and other banks on Wall Street so we can finally end the Era of Big Bank Bailouts and protect the financial security of middle class families and small businesses across the nation.”

In hearings this week, the Senate Permanent Subcommittee on Investigations has uncovered evidence that the Abacus 2007-AC1 transaction was only one in a series of questionable CDO deals by Goldman Sachs.  Besides the 24 other Abacus transactions, the Subcommittee uncovered five other transactions that Goldman Sachs created in order to profit from the collapse of the mortgage market.  

“Small businesses in our community have been forced to shut their doors and millions of dollars in hard-earned retirement savings were wiped out by the reckless behavior of Wall Street,” said Rep. Larsen. “We need to act now and prevent another economic crisis from happening again by focusing on the needs of the hardworking families and small businesses on Main Street -- not the Big Banks on Wall Street.”

April 28, 2010

The Honorable Mary Schapiro
Chairwoman
U.S. Securities and Exchange Commission
100 F St. NE
Washington, DC 20549

Dear Chairwoman Schapiro:

I write to ask the Securities and Exchange Commission (SEC) to broaden your investigation into Goldman Sachs and other investment banks.  

The SEC has alleged that Goldman Sachs failed to disclose to investors information about a synthetic collateralized debt obligation (CDO) known as Abacus 2007-AC1, including the role that a major hedge fund played in selecting which mortgage securities to include in the investment portfolio.  Goldman Sachs also failed to tell investors that the hedge fund was betting against the CDO.  

However, the Senate Permanent Subcommittee on Investigations has uncovered evidence that the Abacus 2007-AC1 transaction was only one in a series of questionable CDO deals.  Besides the 24 other Abacus transactions, the Subcommittee uncovered five other transactions that Goldman Sachs created in order to profit from the collapse of the mortgage market.  I encourage the SEC to examine these transactions to determine whether they included similar misleading statements to investors or any other illegal activities.

I also urge the SEC to investigate other investment banks to determine if similar deals were made to defraud investors.  This week’s Senate hearing showed that Goldman’s actions were common practices on Wall Street.  Other financial institutions were also involved in the securitization of complex financial products tied to the housing market.  

It is vitally important that the SEC investigate Wall Street’s contribution to the economic crisis.  For far too long, investment banks on Wall Street engaged in behavior that was not only reckless, but, as the SEC complaint charges, illegal.  As a result, our country faced the worst economic crisis since the Great Depression.  Since the financial crisis, over 50,000 families in Washington state have entered foreclosure and over 40,000 people have filed for bankruptcy.  Countless small businesses have shut their doors and millions of dollars in retirement accounts have been wiped out.  

For these reasons, I urge the SEC to investigate Goldman Sachs and other investment banks to the fullest extent of your authority.  Thank you for your attention to my request.  

Sincerely,


Rick Larsen
Member of Congress

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