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After Goldman, Who’s Next in the SEC’s Scope?

Posted by Larry Doyle on July 22, 2010 1:15 PM |

One would think the SEC’s settlement with Goldman Sachs was just the break we needed in the logjam to finally get some real truth and transparency into Wall Street business practices. Recall that the Goldman CDO Abacus represented a mere .2 of the total CDO market from 2006-2008.

There must be many more fish in that tank just waiting to get caught by the SEC. American taxpayers deserve nothing less than a full and total accounting and adjudication of the travesty and transgressions embedded in a number of structured transactions on Wall Street. Will we receive that accounting? Is the SEC sending a strong message to those on Wall Street that ‘there’s a new sheriff in town?’  Or is the SEC placating the American public, applying a sizable slap on the wrist to Goldman, and giving Wall Street a wink and a nod indicating that it is ‘business as usual?’ Let’s navigate.

A recent article in The New York Times provided a perspective on this critically important topic, but it left me seething. From the July 16th NYT article, After Goldman’s Concession, Regulators May Be Satisfied:

Will other financial companies be called to account for the sins of the subprime era? Or was the mighty Goldman prize enough to satisfy Washington, if not the many ordinary citizens who blame Wall Street for the Great Recession?

… for now, it appears unlikely that the Goldman settlement will unleash a torrent of similar deals with other banks and financial companies. For one thing, the appetite for bringing another high-profile case has probably been diminished by the Goldman news, as well as Thursday’s approval in Congress of an overhaul of the nation’s financial regulations.

“The S.E.C. got its big check, the legislation was passed, what more do they need to do?” asked Adam C. Pritchard, a securities law professor at the University of Michigan Law School.

Are you kidding me? What more do they need to do?

Goldman’s Abacus transaction represented .2% of the market for 2006-2008. The SEC has a LOT more to do and should be sending that message loud, long, and clear to the industry at large.  If the SEC has not already reached out to every Wall Street bank, they should request meetings and marketing materials from every CDO underwriter. Behaviors are changed not simply by past judgments, but by ongoing and future actions.

Was the Goldman settlement merely a sacrificial lamb under the guise of ‘business as usual’ on Wall Street? If so, this experience will be nothing more than another opportunity lost.


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