Back to top

Analyst Blog

On Friday, DZ Bank AG, a German lender, jumped the bandwagon of other German lenders and filed a lawsuit against The Goldman Sachs Group Inc. (GS - Analyst Report) for misrepresentation of documents while selling mortgage-backed securities (MBS), Bloomberg reported. The lodged complaint accuses Goldman of presenting modified documents related to the sale of over $188.6 million in residential mortgage-backed securities.

The Allegation

DZ Bank alleged that Goldman issued misleading statements with omissions related to the mortgage-backed securities and concealed risks associated with these securities. The plaintiff claims that the documents used for offering the securities contained fraudulent statements or omissions regarding the risks associated with the investments. Misinterpretation of these risks led to the investments, which incurred losses at current levels.

The case has been filed in the New York State Supreme Court in Manhattan and the company demands compensation for the damages. However, Goldman has refrained from commenting on the issue.

Others Facing Similar Issues

Last week, UBS AG (UBS - Analyst Report) was censured by the U.S. regulator for credit unions –National Credit Union Administration (NCUA) – for misrepresentation of documents while selling MBS worth $1.1 billion to two credit unions – U.S. Central Federal Credit Union and Western Corporate Federal Credit Union, which collapsed later.

Similar suits have been filed in the past by NCUA against other big shots like JPMorgan Chase & Co. (JPM - Analyst Report), Royal Bank of Scotland Group Plc. (RBS - Snapshot Report), Goldman as well as against Wachovia, which is now a unit of Wells Fargo & Co. (WFC - Analyst Report). Moreover, settlements have been reached by NCUA with Deutsche Bank AG (DB - Analyst Report), Citigroup Inc. (C - Analyst Report) and HSBC Holdings Plc. , worth over $170 million.

Our Viewpoint

Troubles for Goldman seem to be unending, as only recently it was sued by two other German lenders – IKB Deutsche Industriebank AG (IKB) and Bayerische Landesbank in the Supreme Court over the same issue worth $73.2 million and $511.9 million, respectively.

The array of lawsuits has continued for the major U.S. banks since the financial meltdown. Last month, another Wall Street Biggie – Morgan Stanley (MS - Analyst Report) along with Goldman was sued by HSH Nordbank AG, a German lender, related to the sale of over $524 million and $110 million, respectively, in residential mortgage-backed securities.

Numerous lawsuits alleging banks of such wrongdoings are expected to tarnish their reputation and financials over time. However, the investors and other financial institutions bearing the brunt of these faulty practices are expected to be fairly compensated.

Goldman currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term Neutral recommendation on the stock.

Please login to or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research


Are you a new Zacks Member or a visitor to

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
TRIQUINT SE… TQNT 20.67 +6.52%
RF MICRO DE… RFMD 12.47 +6.04%
VASCO DATA… VDSI 14.77 +4.68%
STRATTEC SE… STRT 80.24 +3.00%
PATTERSON-U… PTEN 34.54 +2.98%