I just want to share a quick thought on the decision by the SEC to indict Goldman-Sachs for fraud.
Goldman-Sachs is the hyper-connected leviathan of Wall Street money and Washington power. The officers and operators of the firm have shuttled back and forth between Wall Street and Washington, becoming the chief architects of our nation’s investment bank marketplace; a marketplace that failed the country. A broader perspective on the firm and its Washington influence can be read here.
Please watch this story carefully over the coming weeks, as it provides a litmus test for how much willpower really exists in the Obama Administration to root financial corruption out of the market. You will soon see powerful forces rising to the firm’s defense, both directly and in terms of attacks on the President’s motives. Although this is a move that should please economic populists and those folks opposed to bailouts, I would bet that the move by SEC chair Mary Shapiro will be cast as part of the Administration’s “socialist agenda”.
I am particularly surprised by this step in an election year, because the officers of this firm (especially after the Citizen’s united Supreme Court decision) can, without assistance, fund massive campaigns in the fall. This represents a kind of courage I have not often associated with Democrats, which makes me unwilling to believe that it will stick….but we will see. I will make one point to those who are concerned about the effect on the free-market; if we are to allow firms the ability to engage in high-risk/high return ventures with limited oversight, then we must be diligent in mandating transparent reporting and rooting out unethical conduct. Markets, by their nature, are money-making instruments that do not lend themselves to ethics…it simply isn’t in their nature self-regulate.
The Rational Middle is listening…