Wow. Our experiment is off to a great start—let's see if we can finish it off sooner than expected.
The Securities and Exchange Commission has charged Goldman Sachs with fraud. The SEC press release is available here. The complaint (PDF) alleges that Goldman marketed a toxic "bundle" of mortgages without disclosing that the bundle was put together with input from John Paulson, a hedge fund manager who had bet against those very same mortgages. Kevin calls the news an "unusually pleasant way to start my morning" but hopes that "this is just the first SEC suit of many." Tom Matzzie, the chairman of Accountable America, says that one SEC suit doesn't amount to real accountability:
While this action by the SEC is encouraging, the pace and volume of civil and criminal actions related to the financial crisis is woefully inadequate. During the S&L crisis, a series of strike forces based in 27 cities were staffed with 1,000 FBI agents, analysts and dozens of federal prosecutors. The result was no less than 1,852 S&L officials were prosecuted and 1,072 were jailed. More than 500 of these were top officers. Where are those task forces today? Where are those prosecutors? Where are those investigations? The SEC, the Department of Justice and other agencies need to do more and do it now.
The man offering the useful context is right! There should be more and better investigations of fraud and abuse in the mortgage market. But let's not go too far in downplaying the significance of these charges. Felix Salmon has it right:
Goldman Sachs has lost more than $10 billion in market capitalization today, in the wake of these revelations. Good. It can go long markets and it can go short markets. But it can’t lie to its clients. That’s well beyond the pale.
You shouldn't lie to your clients. How quaint (and right!)