PM Brown says Goldman risks fraud probe payout
British Prime Minister Gordon Brown on Friday insisted that US investment bank Goldman Sachs should be made to pay massive compensation to banks here if it is found guilty of fraud charges.
Addressing a press conference ahead of Britain’s general election on May 6, Brown said: “If what happened at Goldman Sachs and in any other bank is proven to be wrong, then hundreds of millions of dollars in compensation should be paid to British banks and because we are the main shareholder in many of them, to the taxpayer.”
Britain launched a probe into Goldman Sachs on Tuesday linked to US fraud charges that the Wall Street giant misled investors but the bank has denied any fault while promising to cooperate.
The Financial Services Authority (FSA) watchdog decided to investigate fraud charges announced last week by the US Securities and Exchange Commission (SEC).
The two investigations concern complex instruments and trading positions related to the high-risk end of the US mortgage market which triggered the global financial crisis. Goldman employs about 5,500 staff in London.
The SEC alleges that Goldman allowed a leading hedge fund to put together a product for sale to investors in the hope of a higher rate of return, which the fund was at the same time betting would fall in value.
The SEC claims that investors — including the Royal Bank of Scotland — lost about one billion dollars as a result of the alleged fraud.
RBS was bailed out by the British taxpayer at the height of the global financial crisis and is now 84-percent owned by the state.