Everyday, the politics around the Goldman Sachs prosecution gets more intriguing. The Goldman Sachs case is totally political. But what's amazing here is that anyone is surprised. The case symbolises the deep revulsion we are now seeing in the US about Wall Street practices. The fact that Goldman Sachs was surprised it's been pinged shows how out of touch it is.
First, to a sensational scoop out of Bloomberg that the Securities and Exchange Commission was split 3-2 along party lines to approve the case against Goldman Sachs. According to Bloomberg, SEC Chairman Mary Schapiro, an independent who was appointed by Barack Obama, sided with Democrats Luis Aguilar and Elisse Walter to go ahead with the massive legal claim. Republican commissioners Kathleen Casey and Troy Paredes voted against going for Goldman.
This is fascinating because it shows what a hot potato the Goldman Sachs case is turning out to be, politically speaking. It's particularly significant with the sponsor of the financial reform bill Senator Chris Dodd saying financial reform legislation would have prevented the kind of dirty dealings that have landed Goldman Sachs in trouble and all Republican senators signing a letter pledging their opposition to the current version of his bill. The lines are being drawn.
As Damian Reece at The Telegraph writes, the SEC has given given the White House a pending fraud prosecution Obama can present to US voters as evidence of his tough stance. And if nothing else, that would signal more prosecutions. "It's Politics, Stupid and Goldmans for all its connections (more historic than present and more Republican than Democrat) is a much less credible player in that world. It has been outmanoeuvred,'' Reece writes. "But so too has Wall Street in general because it's the Street that's really going to be on trial in the US District Court. And on the back of the verdict, win or lose, it faces an inevitable backlash from legislators who will demand greater control and regulation of what Wall Street does and how it does it."
Which raises the question of who's next? The Wall Street Journal reports that the SEC is looking at whether other mortgage deals mislead investors. The WSJ identifies Deutsche Bank, UBS and Merrill Lynch but then says it doesn't know whether the SEC is targeting them. Still, there is no doubt that plenty of firms were involved in this sort of activity. The question is whether the politics will drive the SEC and White House to pursue them.
For its part, the White House has come out and said it had nothing to do with the decision to go for Goldman Sachs. Meanwhile, Goldman Sachs has hired former White House counsel Gregory Craig, reports politico.com. Craig served in the Obama administration.
Goldman Sachs is becoming a political yardstick for the Obama administration.
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