Like many others in the liberal blogosphere, I am happy to read in the New York Times that the SEC is accusing Goldman Sachs of securities fraud:
The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers.
Other good articles are in the Washington Post and The Economist. Thanks to the Internet, you can also read the actual SEC release (or the Goldman Sachs response denying everything.):
"The product was new and complex but the deception and conflicts are old and simple," said Robert Khuzami, Director of the Division of Enforcement. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party."
According to the SEC's complaint, the deal closed on April 26, 2007, and Paulson & Co. paid Goldman Sachs approximately $15 million for structuring and marketing ABACUS. By Oct. 24, 2007, 83 percent of the RMBS in the ABACUS portfolio had been downgraded and 17 percent were on negative watch. By Jan. 29, 2008, 99 percent of the portfolio had been downgraded.
The political power of Goldman is incredible, with literally over $30 million of donations by employees over the last two decades and ex-Goldman people throughout the government. Of course, the vast majority of these people had nothing to do with this particular 2007 deal, and I do not consider them responsible for it. The company itself, however, is now involved in a major scandal, so their PAC may be considered tainted. I think it's also likely the scandal will grow as more documents are uncovered.
Democrat Ed Potosnak discovered that Representative Leonard Lance (NJ7) took thousands of dollars from Goldman Sachs just last month! He is calling for Lance to return the money:
"The alleged actions of Goldman Sachs are emblematic of conflicts of interest that put our economy and families at risk," Potosnak said Friday. "We need common sense reforms to hold banks accountable for the risky practices that led our economy into the gutter. My opponent, a member of the House Committee on Financial Services, has opposed nearly every effort to improve the financial services industry, to provide consumer protections, or to hold banks accountable. He takes tens of thousands of dollars in financial contributions from the financial special interests and puts aside the interests of our working families."
"Our campaign is about fighting for the interests of our families against the influence of powerful special interests. If Lance returns the money Goldman Sachs invested in him, it would not undo his record when it comes to consumer protections, but it would, at the very least, indicate that he recognizes that residents in New Jersey's 7th Congressional District do not want this kind of money dictating the actions of their elected officials."
Let me be blunt: Potosnak is 100% correct in this statement. However, once you look at the FEC list of candidates supported by The Goldman Sachs Group PAC, you'll find many other many Democrats and Republicans on their list, including New Jersey ones. We need challengers in both parties, and responsible incumbents, to reject the bipartisan cozy relationship with Wall Street. To me, the donations look all too much like kickbacks for gutting regulations. |
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