Obama’s SEC war against Goldman Sachs

April 16, 2010

A few thoughts on the SEC charges against Goldman Sachs:

1) Goldman Sachs gave the Obama campaign $994k during the 2008 election, his biggest donor. Doesn’t this undercut the theory just a bit that Washington is under the thumb of Wall Street?Even a tiny bit? (No, say Simon Johnson and James Kwak.)

2) I can’t help but think this boosts the odds of financial reform passing and a shift it to the left, as well. You might even see more GOPers advocate for breaking up the banks, as do some Fed regional presidents.

3) Certainly under the leadership of a new chairman and enforcement director, the SEC’s Obama years have marked a hard switch from the posture of the Bush SEC. In 2009, the regulator opened twice as many investigations as in 2008, with fines up 35 percent. The new assertiveness helped cool talk the Hill that the SEC should be merged with the CFTC pushed into a giant super-regulator

4) But its aggression can also lead to unforced errors. A judge threw out a $33 million SEC fine against BofA regarding bonuses paid to Merrill Lynch employees. The SEC also failed to execute in its case against Cohmad Securities and the firm’s involvement with Bernard Madoff. In February, a federal court dismissed the SEC’s “flimsy” charges that Cohmad helped enable the notorious Ponzi schemer.

5) A failed case against Goldman for alleged securities fraud might leave the SEC in worse shape. It would also open the watchdog to charges that the timing of its charges, right in the middle of a debate over financial reform, was merely an attempt by the Obama administration to intimidate Wall Street into supporting its get-tough legislation.

6) This is exactly the sort of scenario a bank exec outlined to me a few months back. The exec worried that the longer FinReg reform dragged on, the odds increased that some bolt-from-the-blue news would change the political calculus and push the bill to the left.

16 comments

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[...] This post was mentioned on Twitter by James Pethokoukis. James Pethokoukis said: from my blog: Obama’s SEC war against Goldman Sachs http://bit.ly/asOi9A [...]

Well, if you are right, this is his third largest blunder.

Working backwards: So we are going to Mars, they must be sprinkling space dust on the food in Air Force One. JFK makes such announcements, and he stuck to the Moon, for good reason. This is BO’s second biggest blunder, not even a kid would believe it.

The first blunder was using the work ‘kill’ twice in his Nobel Peace Prize Speech.

Einstein allowed himself one blunder, and he ended up in a garden cottage with a bicycle.

Posted by Ghandiolfini | Report as abusive

…with a box of chalk.

Posted by Ghandiolfini | Report as abusive

The time machine of 2010….. is this really the best the SEC can come up with to sustain their position and their jobs? Or are we going back to the era where witch hunts were legitimate in the 1950’ies? Who knows!

What we know for sure is the details of the SEC allegations. They are not sufficient to even rock the boat at a tiny wrap-manager in Congo, let alone that of a badly managed bank such as Citi.

The SEC management lost their head in the search of the culprits of the six to seven years march towards market collapse in housing, even encouraged by members of congress with a view to allow more Americans to own a house.

Taxpayers must stop these political games played by servants paid by them. Has to be done as fast as possible to save the nation and its reputation from radicals in both polical camps.

That’s not to say the Goldman camp may not have become complacent, but never fraudulent after their highly successful attempt to influence several levels in public life at large over several years. The allegations are too primitive, while the SEC’s obvious negligence in reviewing a simple imposter such as Madoff, bringing his publicly exposed circus to a halt no later than in 2001 or 2002, has left a cloud over US regulatory regimes thicker than the clouds over Europe triggered by the Iceland volcano.

When a country’s credibility is tampered with by civil servants, which is the real issue of the Goldman allegations, to improve (or finally undermine) their career prospects, then most people would understand that systemic errors must be removed.

Let’s start with the SEC, while losing creditability with the surrounding world, in particular the nation’s biggest creditors required to buy and hold the increasing stream of treasuries to keep America afloat.

What’s next? Impeachment of Donald Duck and David Letterman?

Posted by HuckleberryFinn | Report as abusive

Yeah, Government Sachs is right. We don’t need any reform to keep those bankers from driving the entire world to the edge of complete and utter financial meltdown…. NO. They didn’t quite complete their damage, and want to do more. Can’t you all see. We (the people of the United States) MUST allow them to complete their destiny – to drive the entire world into financial and economic chaos….
We don’t need no stinking badges… coming around and trying to show people how crooked we really are. That would be un-American.

Posted by edgyinchina | Report as abusive

Good for Obama. Finally, attacking Wall Street. How about jacking up the tax rate on record Wall Street bonuses?

Posted by Storyburncom_is | Report as abusive

No one who knows how much the financial industry gave to Democrats in 2008 ($500 mil) takes this suit seriously. It’s a pro forma fig leaf to keep up the Dems’ carefully cultivated image of being for “the little guy” despite the fact that they have been the party of the uberrich for a couple of decades. The SEC has neither the smarts nor the people to attack serious wrong-doing, even if they knew what it looked like. The fact that GS refused to buy off the administration in a settlement proves the Government’s got no case. Can you say “kabuki?”

Posted by Corlyssd | Report as abusive

There shouldn’t be things like too big to fail, too well-connected to be thrown to the dogs, and too sophisticated to be understood.
Keep it simple, and fair.
It’s a fact of life that WS institutions depend on the public, and on the Government, and therefore they should abide rigorous standards applied to government agencies.

Posted by yr2009 | Report as abusive

I have an idea lets hold our government accountable for once. I don’t see them going after fannie and freddie because that would implicate their lack of understanding of the financial markets. How can the most irresponsible people with no accountability have this much power!

Posted by jbchitown | Report as abusive

If major felonies have a way of pushing anti-crime reform to the left, and if for some reason you don’t like that, then maybe you really ought to be having a word with your right-wing idols about not committing quite so many felonies.

Meanwhile, coming to brass tacks with Goldman – bring on the FBI. That should sort things out right quick. Or are they too far left for you, too? Please let them know if that’s what you think.

Posted by HBC | Report as abusive

This is not, “Jimmy Boy”, O’Bama’s war against Goldman, but the peoples.

Posted by BRUVIE | Report as abusive

I am a conservative and a Republican and I find Goldman’s behavior disgraceful and repugnant. I am glad that the SEC is finally bringing some charges. Half or more of Goldman’s profits stem from corporate welfare in the form of interest free borrowing. They are not a shining model of free market capitalism to defend. There are many better businesses.

Look at the SEC’s Khuzami as he explains the case. The charges are simple and clear.
http://blogs.reuters.com/rolfe-winkler/2 010/04/17/questions-for-khuzami/

Still, it is unfortunate that Obama and his group of gangsters will probably use this as cover to try to ram through another partisan bill to the detriment of the country.

My advice to Republicans is to get ahead of this with a good plan for reform. Derivatives need to go on exchanges because otherwise they are too risky. The American people are in favor of Wall Street reform about 99 to 1 right now, and it would be unfortunate if Republicans blew their gains on health care by appearing to side with Wall Street.

Posted by DanHess | Report as abusive

I am amazed at comments like, “Good for Obama. Finally attacking Wall Street.” How can people be so naive? This administration, whose tactics are from Southside Chicago, may be playing a little CYA…they realized the amount that Goldman contributed to the Obama campaign would be used in future elections and so they decided to bring a very weak case against Goldman, probably with Goldman’s knowledge, so they could cover up Obama’s coziness with some Wall Street firms. No amount of trickery from this administration would surprise me…they are just not trustworthy. They have totally destroyed my faith in the Democratic party ethics. I have been supporting and defending the Democratic party for decades. I no longer can do that…sadly.

Posted by lezah2 | Report as abusive

[...] Goldman Sachs was also Obama’s single largest campaign contributor, donating about $994,000 to Obama’s 2008 Presidential Campaign (source: Reuters) [...]

The SEC as an agency is a complete failure. Throughout its financial history, since 1933, it has FAILED in its MANDATE to protect investors from “abuse” by financial manipulators.

The Easiest Solution is to DISSOLVE the damn agency, and TELL EVERYONE that You’re on your own! Personal Responsibility needs to be reasserted throughout our society.

Congress blocked the types of legislative changes that would have minimized the Mortgage issues that created this nonsense. Democrats willingly made laws that would lead to this disaster. The SEC DID NOTHING! and now they want to blame Goldman Sachs, who spent millions on lobbying the same legislators who are now getting off Scott-Free from their primary role to creating this crises.

Posted by Capndiesalot | Report as abusive

If the socalled do-gooders in congress were really serious about financial reforms, they would fire half of the SEC staff, then fully investigate Fanny and Freddie with no holds barred. That includes putting the spotlight on Barney Frank and company!

Posted by donsal | Report as abusive

I find it interesting that the Govt is going after this company when it was the government that provided the subprime loans to the market to begin with. When will Barney Frank and Chris Dodd take the stand that explain their role in this mess along with Freddie Mac and Fannie Mae?

Oh I’m sorry. It’s the Govt and they do nothing wrong.

Let’s vilify everyone unless they are Uncle Sam since we can trust them with everything in life.

I’ll take my chances in the wilderness!

Posted by Keithva | Report as abusive

How about stopping SEC employees from sitting all day viewing on-line porn at the taxpayers dime.

Posted by Keithva | Report as abusive

[...] Goldman Sachs was also Obama’s single largest campaign contributor, donating about $994,000 to Obama’s 2008 Presidential Campaign. (source: Reuters) [...]