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Goldman charges bolster case for bank reform
WASHINGTON |
WASHINGTON (Reuters) - Fraud charges filed by federal regulators against Goldman Sachs on Friday immediately added momentum to the push on Capitol Hill for U.S. financial regulation reform.
A sweeping reform bill was expected to come to a vote soon in the Senate. The Democratic bill, backed by President Barack Obama, would slap new restraints on large firms like Goldman.
The Goldman case centers on a collateralized debt obligation, a debt instrument that was based on securitized subprime home mortgages. The securitized debt market is directly targeted by Democratic reform proposals.
"This is another example of how risky Wall Street behavior puts our nation's financial system in peril and further illustrates the need for the strong reform that my legislation provides," said Senator Blanche Lincoln in a statement.
Lincoln, who is chairman of the Senate Agriculture Committee, unveiled a bill on Friday cracking down on the unpoliced over-the-counter derivatives market. Her bill will likely be folded into a broader Senate bill.
"The timing of this works out well to get some legislation done ... it gives (lawmakers) another arrow in the quiver," said Jason Tyler, a senior vice president at asset management group Ariel Capital Management.
The House approved its financial reform bill in December. It would have to be merged with whatever the Senate produces before a final bill could go to Obama to be signed into law. Analysts say that could happen by midyear.
SUPPORT FOR SEC
As news of the Securities and Exchange Commission's lawsuit
against Goldman broke, senators vowed support for the SEC and determination to bring lawbreakers to justice after the worst financial crisis in generations.
"These are complicated cases that take time to develop.
However long it takes, whatever resources the SEC needs, Congress needs to continue to back the SEC and the Justice Department," said Democratic Senator Ted Kaufman.
Goldman was charged with fraud by the SEC over the structuring and marketing of the CDO. The SEC alleged that hedge fund Paulson & Co worked with Goldman in creating the instrument and stood to benefit as its value fell, costing investors more than $1 billion.
Fabrice Tourre, a Goldman vice president who the SEC said was principally responsible for creating the product, was also charged with fraud. Paulson has not been charged.
The lawsuit, filed in Manhattan federal court, marks a dramatic expansion of efforts to hold people and companies accountable for the 2007-2009 crisis that tipped the economy into a deep recession and unleashed a drive for reforms.
"While its action was slow in coming, I applaud the SEC for finally beginning to deal with the illegal behavior of major Wall Street firms which, in my view, knowingly sold junk products and as a result helped cause the worst recession since the 1930s," said independent Senator Bernie Sanders.
Democrats pushed their reform bill through the Senate Banking Committee last month and are now trying to round up enough Republican support to win approval in the full Senate.
"Whatever reform financial services investors were bracing for, this could be the impetus to speed it up and perhaps give it more teeth and what does that do to the profitability of Goldman and others going forward?" commented David Dietze, president of Point View Financial Services.
(Additional reporting by Jonathan Stempel, Maria Aspan, Elinor Comlay in New York; Editing by Kenneth Barry)
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Even this fraud is going to be brushed under the table because no one understands the ‘complexities’ of the trades through so many institutions worldwide. Paper trails are being ‘lost as we speak. (the one scape goat who wrote damaging emails will hang, the rest will walk)
Huge wads of cash paid out so the too big to allow failure no longer falter and then huge bonuses are paid to those who made them falter. *blinks*
Why weren’t the crooked banks and investment firms being regulated long before this? Only those that are well regulated are doing well and legally. How can no one blink an eye yet the public balks at Healthcare reform? Are you guys all nuts?
It’s not because there aren’t sufficient laws governing their crimes and it’s not because their crimes are sufficiently well hidden.
It’s because most people in America are more interested in their favorite baseball team’s box scores and more interested in sexual faux pas and social faux pas as addressed by Dr. Phil and Oprah.
Most Americans are not even aware of what happened on Wall Street to bring down our nation’s economy, they just know that there were more bad actors than usual getting richer than usual and some complicated thing went wrong and some people got caught doing bad things.
Most can’t fathom more than that and they either assume that justice will prevail or they know that it probably won’t.
Those of us who “get it” must keep insisting that the Wall Street people and their henchmen in Congress need to have their feet held to a very hot fire.
We have a chance of justice in this matter because so many people and companies and countries were effected to adversely by what happened.
The elite American aristocracy might have gone too far this time.
Class action civil suits are NOT enough. I want to see real justice… real prison time served in real prisons by everyone who knowingly profited by their participation in bringing down the most powerful economy on earth.
I want to see ALL of their vast wealth and assets stripped away, first used to cover the legal expense of trying them in court and the remainder to be applied against the national debt.
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