Credit specialist and Asia Times contributor David Goldman is on record believing that SEC vs. Goldman Sachs (GS) is going to be huge.
First, he argues, logically, that if anything, it’s Fabrice Tourre who has the leverage over his employer:
[The SEC has] nailed a 32-year-old Goldman vice president who cobbled together the tainted structure, and he appears to be singing. Investment banks aren’t like the mafia. No-one takes 20-year sentences and keeps their mouth shut. This case very well might open up others.
And then here’s why this goes way beyond Goldman.
Investors who lost a trillion dollars in subprime CDO’s now will descend like Harpies upon the banks that packaged them, with subpoenas for every email and internal memorandum involved. The civil suits that could arise from this are potentially innumerable.
It’s a good time to get into the bunker where financial stocks are concerned.
Indeed, that seemed to be the calculs on Friday, when financials were sold off dramatically. It’s also why, in the end, the frailties of the SEC’s case, may not matter very much. At issue is not whether Goldman would lose a civil case — at issue is reputational damage, and the opportunity for others who lost money to reason: well, if the SEC has grounds to sue, then so do we.
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