TARP watchdog probes Goldman CDOs, maybe Blackrock

Tue Apr 20, 2010 1:36pm EDT

* TARP watchdog says U.S. taxpayer could be affected

* Audits into role of BlackRock in TARP may expand

WASHINGTON, April 20 (Reuters) - The special inspector general for the government's bailout program said he would probe whether securities sold by Goldman Sachs Group Inc (GS.N) led to losses at AIG and if the American taxpayer was a victim of fraud.

Goldman Sachs was charged last week with fraud by the U.S. Securities and Exchange Commission over its marketing of a subprime mortgage product.

The SEC's charges concern Abacus, a synthetic collateralized debt obligation that hinged on the performance of subprime residential mortgage-backed securities, and which the regulator said Goldman structured and marketed.

According to the SEC, Goldman did not tell investors "vital information" about Abacus, including that Paulson & Co was involved in choosing which securities would be part of the portfolio Paulson was separately betting against.

There are seven deals similar to Abacus for which AIG wrote credit default swaps, according to Neil Barofsky, the special inspector general for the Troubled Asset Relief Program.

American International Group Inc, or AIG, is the insurance behemoth largely owned by U.S. taxpayers after its government bailout last year.

Barofsky said he is in touch with the SEC and will possibly coordinate with the Department of Justice "to see if there are cases of fraud and if AIG and as a result, the American taxpayers, were victims of similar types of fraud."

Barofsky made the comments in response to questions from the ranking Republican on the Senate Finance Committee, Charles Grassley, at a hearing examining the TARP.

Separately, but also in response to questions, Barofsky said he is considering a broader audit of the role of BlackRock Inc (BLK.N) in TARP.

"We are doing a number of audits that touch on Blackrock's role. And it is an extensive role throughout this financial crisis," Barofsky said.

For example, current audits, including one on Citigroup Inc's (C.N) asset guarantee program, touch on Blackrock, he said.

"We are considering doing a more overarching audit report on their role throughout the financial crisis." (Editing by Padraic Cassidy)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.