Workers United, a labor union representing 150,000 members in the U.S. and Canada, has called on 10 state attorneys general to investigate Goldman Sachs' involvement in subprime lending.
In a letter received by the attorneys general this week, Workers United urged states to follow the lead of Massachusetts, whose attorney general, Martha Coakley, settled with Goldman Sachs in May after her investigation suggested the bank had ‘played a role’ in predatory lending in the state.
Goldman paid $10 million to the state and agreed to an estimated $50 million in direct relief for those homeowners whose loans were held by the firm. Goldman Sachs issues and underwrites mortgage-backed securities, and it is the parent company of Litton Loan Servicing.
‘It's just plain wrong that Goldman Sachs would participate in predatory lending that puts Americans at risk of losing their homes and then pocket billions in profits and bonuses,’ says Bruce Raynor, president of Workers United. ‘It's heartening to see the tough stance that Massachusetts has taken. I hope many other states will follow its lead.’
Workers United says it has analyzed $23.2 billion worth of Goldman Sachs' mortgage pass-through certificates offered from August 2005 to February 2007, and the union found that 10 states had 102,524 mortgages, 61% of the national total, included in Goldman's securities.
The union estimates that the states it analyzed – Arizona, California, Florida, Georgia, Illinois, Maryland, New Jersey, New York, Texas and Virginia – have been home to almost 1.5 million foreclosures this year.
A spokesperson for Goldman Sachs told Bloomberg News that the bank takes issues with the union's assertions, saying, ‘Goldman Sachs was never one of the larger issuers of subprime securities.’
Workers United's letter to New York Attorney General Andrew Cuomo, which has been posted to the union's Web site, states Goldman Sachs has issued more than $33 billion in mortgage-backed securities containing subprime loans, including GSAMP Trust 2006-S3, a security that includes 559 New York mortgages. GSAMP Trust 2006-S3 has twice been profiled by CNN as "the worst deal they knew of that had been floated by a top-tier firm," according to the letter.
‘We urge you to initiate an inquiry into the role of Goldman Sachs in securitizing these mortgages in New York and secure compensation for homeowners in your state," the letter states.