Goldman Sachs, Citigroup Sued Over Subprime Loans

William McQuillan
Goldman Sachs Group Inc., Citigroup Inc., Morgan Stanley and dozens more bank and brokerages were sued by a Boston area-based fund seeking reimbursement for losses related to subprime loans. 
Cambridge Place Investment Management Inc., founded by ex- Goldman Sachs Group bankers Martin Finegold and Robert Kramer, lost more than $1.2 billion as a result of the banks’ untrue statements, according to a copy of the complaint filed July 9 in state court in Massachusetts. 
The banks sold securities backed by mortgages that came from a “small group of now notorious subprime mortgage originators,” used faulty appraisals, accepted misleading information in loan applications, and violated their own standards for underwriting, the firm said in the lawsuit. The banks offered or sold $2.4 billion of residential mortgage- backed securities using untrue statements, according to the lawsuit. 
“The Wall Street banks conducted inadequate due diligence and failed to satisfy their own responsibilities,” Cambridge Place said in the lawsuit. 
The bundling of the riskiest type of mortgages into securities played a role in turning the U.S. housing slump into a global recession as foreclosures deflated bond values and toppled Wall Street firms including Lehman Brothers Holdings Inc. 


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