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Goldman Sachs Group Inc. and the Securities and Exchange Commission recently held discussions about a possible settlement to simultaneously resolve the fraud lawsuit against Goldman and some of the agency’s lower-profile probes of the Wall Street firm’s mortgage department, according to people familiar with the situation.
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The world’s second-biggest private-equity firm was sued this week over its “reckless and grossly negligent” management of a failed mortgage bond affiliate that cost investors nearly $1 billion, according to suits filed in Delaware and New York.
The Carlyle Group, which oversees more than $90 billion across six continents, stands accused of paying its executives “excessive and unjustified” fees while managing its hedge fund, Carlyle Capital Corporation, into the ground, the Financial Times and Bloomberg News report, citing the two lawsuits. CCC, which invested in mortgage-backed securities and “leveraged finance assets,” collapsed in March 2008 after it “failed to meet more than $400 million of margin calls on mortgage-backed collateral,” Bloomberg reports.
By the end of 2007 the fund had $21 billion in debt but just $75 million to meet margin calls, the FT reports, citing the lawsuit.
Investors in the fund allege that Carlyle Group officials took more than $20 million in fees and more than $50 million in other benefits, the FT reports, citing the lawsuit, despite that within a year the failed hedge fund had unrealized losses exceeding $270 million.
“In the short space of eight months, the entirety of CCC’s capital was spectacularly lost under the reckless and grossly negligent direction, supervision, management and advice of the defendants,” Bloomberg reports, citing the lawsuit. The Carlyle Group “preferred” its own “corporate interests” over that of the hedge fund, the lawsuit alleges, according to the FT.
The $945 million hedge fund sought annual returns of at least 12 percent, according to the Delaware-filed suit, Bloomberg reports. While the fund called for leverage of about 19 times capital, the actual leverage exceeded 30 times capital, Bloomberg reports, citing the lawsuit.
“CCC’s losses were the direct result of a determinedly reckless ‘bet the farm’ approach, brazenly pursued in the self-interests of the Carlyle Group,” Bloomberg reports, citing the lawsuit.
Officials at the Carlyle Group said they would contest the claims. They also noted that their own employees lost $230 million on the failed fund, Bloomberg reports.
The Carlyle Group has more than 880 employees spread over 19 countries, the firm’s website notes. It’s invested more than $60 billion of equity in 969 deals since 1987, and its current deals generate $84 billion in revenue and employ nearly 400,000 people around the world.
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More than one in seven homeowners with loans in excess of a million dollars are seriously delinquent, according to data compiled for The New York Times by the real estate analytics firm CoreLogic.
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LOS ALTOS, Calif. — No need for tears, but the well-off are losing their master suites and saying goodbye to their wine cellars.
The housing bust that began among the working class in remote subdivisions and quickly progressed to the suburban middle class is striking the upper class in privileged enclaves like this one in Silicon Valley.
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WASHINGTON — Mortgage rates fell this week to the lowest level on record, giving consumers added incentive to lock in low payments on home purchases and refinancings.
Mortgage company Freddie Mac said Thursday that the average rate for 30-year fixed loans sank to 4.69 percent, from 4.75 percent last week.
That’s the lowest since Freddie Mac began tracking rates in 1971. The previous record of 4.71 percent was set in December. Rates for 15-year and five-year mortgages also hit lows.
Mortgage rates have fallen over the past two months. Investors wary of the European debt crisis and the turbulent stock market have shifted money into the safety of Treasury bonds, driving down yields. Mortgage rates tend to track the yields on long-term Treasury debt.
Freddie Mac collects mortgage rates on Monday through Wednesday of each week from lenders around the country. Rates often fluctuate significantly, even within a given day.
Rates on 15-year, fixed-rate mortgages fell to an average of 4.13 percent, the lowest on records dating to September 1991 and down from 4.2 percent a week earlier.
Rates on five-year, adjustable-rate mortgages averaged 3.84 percent, down from 3.89 percent a week earlier. That was also the lowest on Freddie Mac’s records, which only date back to January 2005.
Average rates on one-year, adjustable-rate mortgages fell to 3.77 percent from 3.82 percent. That was the lowest average since May 2004.
The rates do not include add-on fees known as points. One point is equal to 1 percent of the total loan amount.
The nationwide fee for loans in Freddie Mac’s survey averaged 0.7 a point for 30-year, 5-year and 1-year loans. The average fee for 15-year loans was 0.6 of a point.
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