Why Goldman didn’t see the SEC suit coming
Jim Surowiecki is right about one thing: the SEC/Goldman/Abacus story has, at its heart, a story of people who were looking backwards at what had happened in the past, and therefore couldn’t see in front of their noses what was just about to happen in the immediate future.
Yes, I’m talking about ACA, IKB, and the housing crash. But I’m also talking about the relationship between Goldman Sachs and the SEC, and Goldman’s bizarre decision not to disclose the fact that it received a Wells notice in July 2009.
Why didn’t Goldman disclose the existence of the Wells notice? Because it reckoned that the SEC wouldn’t file a suit against it. After all, for years now the SEC has been a comatose beast run by supine Republicans, and, as Joe Weisenthal puts it, elephants love the squid.
And as it happens, both of the Republican commissioners on the SEC voted against suing Goldman. The two Democrats voted in favor, and chairman Mary Schapiro voted with them.
And somehow Goldman failed to notice that there was a Democrat in the White House, that Hank Paulson wasn’t at Treasury any more, and that they couldn’t rely on SEC toothlessness going forwards in the way that they had done in the past. At the very least, they expected that the SEC would give them the heads-up that a suit was coming, and maybe give them the opportunity to settle.
But that’s how the old SEC worked, not the new SEC with a chairman desperate to look tough in public. And Goldman, somehow, was oblivious to the change.