Merkel Said to Avoid Working With Goldman Sachs Pending SEC Suit Outcome
Angela Merkel, Germany's chancellor
Jock Fistick/ Bloomberg
Angela Merkel, Germany's chancellor, arrives for the European Union Summit in Brussels, on March 26, 2010.
Angela Merkel, Germany's chancellor, arrives for the European Union Summit in Brussels, on March 26, 2010. Photographer: Jock Fistick/ Bloomberg
German Chancellor Angela Merkel’s administration wants to avoid awarding new business to Goldman Sachs Group Inc. pending the outcome of U.S. regulators’ fraud suit against the firm, a government official said.
A decision to curb business with Goldman Sachs would be considered if the Securities and Exchange Commission allegations are proven, said the German official, who declined to be named because the matter hasn’t been considered by Merkel’s Cabinet.
The remarks come as politicians in Europe squabble over doing business with Goldman Sachs, underscoring the limits of rhetoric. In Germany, Goldman Sachs remains a primary dealer of bunds and underwriter for the KfW state development bank, spokesmen for the institutions say. U.K. Chancellor of the Exchequer Alistair Darling rejected calls to bar the New York- based investment bank from government work.
Germany’s BaFin regulator is in contact with the SEC to seek further details of Goldman Sachs’ involvement with IKB Deutschland Industriebank AG, Finance Ministry spokeswoman Jeanette Schwamberger told reporters April 19. IKB was Germany’s first victim of the U.S. subprime mortgage crisis in 2007 and was bailed out with almost 10 billion euros ($13.5 billion) by KfW Group to shore up the German banking system.
Subprime Mortgages
The SEC said that in early 2007, as the U.S. housing market teetered, Goldman Sachs created and sold a collateralized debt obligation linked to subprime mortgages without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicle, known as Abacus 2007-AC1.
Goldman Sachs has denied wrongdoing and said it would fight the suit. Monika Schaller, a Goldman Sachs spokeswoman in Frankfurt, declined to comment when contacted by phone today.
Until the German probe’s completion, Goldman Sachs will remain an “important member” of a 30-member bidding group for federal government bonds, Finance Agency spokesman Joerg Mueller said by phone. BaFin “would have to present an opinion that Goldman violated financial market laws” before action could be taken.
KfW works with all big banks that play a role in the placement of corporate bonds, including Goldman Sachs, spokesman Wolfram Schweickhardt said.
The German government turned to Goldman Sachs for advice when it planned to privatize state-owned companies Deutsche Telekom AG and Deutsche Bahn AG. The initial public offering of rail company Deutsche Bahn has been postponed.
Berlin’s regional government wants to keep Goldman Sachs at arm’s length, said the city-state’s local finance minister, Ulrich Nussbaum.
“If at all possible, one should avoid doing business with these people,” Nussbaum said via his spokesman, Daniel Abbou.
To contact the reporter on this story: Rainer Buergin in Berlin at rbuergin1@bloomberg.net
Rate These Stories
Rate this Page