(This is a post from New Deal 2.0.)
SEC’s Goldman case brings up a lot of questions, most importantly, why is the only person named at Goldman, Fabrice Tourre, at the time, a 27 year old VP? In an email from 2007, the two-million dollar a year 27 year old writes:
“More and more leverage in the system. The whole building is about to collapse anytime now… Only potential survivor, the fabulous Fab(rice Tourre)… standing in the middle of all these complex, highly leveraged exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”
Let’s understand, everyone knew what was going on. Chris Whalen has some good insight over at Institutional Risk Analytics. Chris writes that in 2004 the SEC released some advise on the world of structured finance “focused almost entirely on protecting the dealers from reputational risk and not on protecting investors.” He writes:
The fact of the 2004 notice by the SEC and other regulators illustrates the problem. Regulators clearly knew that a problem existed back then, yet the SEC waited until April of 2010 to actually do something constructive to rebalance the equation, to lean just a bit more in the direction of investors and a bit less in favour of the dealers. Keep in mind that it’s not like the games played by GS and the Paulson organisation were remotely unique. Just about every OTC dealer worthy of the description has at least one deal comp to this thing of beauty.
Yves Smith has started a list of other cases to be looked into, however, the SEC remains a captured regulatory agency. The Goldman case is a hope for the beginning of restitution, but only a beginning. In thinking about this yesterday, Scooter Libby popped to mind. Remember in 2005, looking at the fraud and criminality that brought about this naiton’s occupation of Iraq, special prosecutor Patrick Fitzgerald laid out the case with his indictment of Scooter Libby, bringing responsibility to the feet of the Vice President, and thus the President. Mr. Fitzgerald, and I think rightfully, then said to the Congress it wasn’t his role to indict the Vice President, that the constitution provided clear authority to the Congress in such matters. Of course that ended it, Scooter went to jail, while Mr. Cheney still pops up haunting our cowardly Democrats.
The President should bring the Attorney General into these matters, and the Congress should force his hand. Instead, we see the beginnings of attention aversion to a sham financial reform effort. How can you honestly address the issues, when you can’t honestly address the problems? How can you have two financial reform bills, one already voted through the House, the other ready to go through the Senate, when the idea of criminality has not even been broached? We will not have financial reform until we have political reform. And unless the American people demand it, we will have neither.
Joe Costello was communications director for Jerry Brown’s 1992 presidential campaign and was a senior adviser for Howard Dean’s effort in 2004.
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