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Jul. 26 2010 - 4:28 pm | 38 views | 0 recommendations | 1 comment

Why strong financial reform was so important

Remember when the Securities and Exchange Commission bringing a suit against Goldman Sachs was big news? Goldman is the darling of Washington financiers and the idea that the SEC could sue them over, of all accusations, fraud, was a lightning rod of news in the lead up to financial reform just four months ago.

Yours truly made the resplendent comment that the move signalled there were, “no sacred cows, anymore.” Those were exciting heady days before things with financial reform had really started to unfold. So what has happened with Goldman and the SEC since then?

Here’s what,

Goldman, Sachs & Co., the broker-dealer, has agreed to a settlement with the U.S. Securities and Exchange Commission to resolve the SEC’s pending case against the firm relating to disclosures in the ABACUS 2007-AC1 CDO offering. The settlement is subject to the approval of the United States Court for the Southern District of New York.

The firm entered into the settlement without admitting or denying the SEC’s allegations. As part of the settlement, however, we acknowledged “that the marketing materials for the ABACUS 2007-ACI transaction contained incomplete information. In particular, it was a mistake for the Goldman marketing materials to state that the reference portfolio was ‘selected by’ ACA Management LLC without disclosing the role of Paulson & Co. Inc. in the portfolio selection process and that Paulson’s economic interests were adverse to CDO investors. Goldman regrets that the marketing materials did not contain that disclosure.”

We believe that this settlement is the right outcome for our firm, our shareholders and our clients.

To cut to the chase: in order to not have to publicly admit that they committed fraud, Goldman Sachs paid $550 million to settle a case with the SEC over… committing fraud. For all the fanfare and speculation over the announcement of the SEC’s case against Goldman, the settlement, which was announced on July 15, barely warranted a blip in the news cycle. Goldman Sachs did not deny fraudulent behavior costing their own customers approximately $3.7 billion and it basically went by unnoticed in most news circles.

That is a startling fact and it helps to demonstrate why overhauling the American financial sector was so important. When a $550 million settlement over a fraud case involving the country’s previously most reputable investment bank — a bank that initially called the suit, “completely unfounded in law and fact” — goes by basically unnoticed, you know that there are serious structural problems with how finance in the country conducts its business.


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  1. collapse expand

    Goldman Sachs fraudulent behavior went by unnoticed in most news circles.

    1. Isn’t ‘cut & paste’ a wonderful tool?
    2. The fact that their behavior went by unnoticed would seem to indicate that we are a country of Attention Deficit Disordered beings.
    3. It would also seem to indicate that if our every little need isn’t being met in record time we move onto something else that excites us.

    Thank you for at least attempting to enlighten the ‘ignorant hordes’ so that ‘we’ will use said enlightenment when we go to the polls this November. And I promise I will, if something more pressing hasn’t flitted across my gray matter between now and then. :-)

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    About Me

    I'm a Canadian blogger who spends far too much time reading and writing about US politics. I've been involved in various forms of political organizing for the past decade, some of which has earned me recognition and other of which has earned me the title of "no good punk".

    I also blog at The League of Ordinary Gentlemen, the Commons, Beams and Struts, and The Washington Examiner's Opinion Zone.

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    Contributor Since: March 2010
    Location:Calgary, Alberta