Regarding the SEC's case against Goldman Sachs, Wall Street Journal editors are, shall we say, skeptical. I'd say you could add me to the list of skeptics, except that I was already on it. It's not that I have any great financial or legal expertise, but rather that every action that the Obama administration takes has a political purpose. which is to benefit the Democratic Party.
By the way, Goldman was also one of the losers here. Although the firm received a $15 million fee for putting the deal together, Goldman says it ended up losing $90 million on the transaction itself, because it ultimately decided to bet alongside ACA and IKB. In other words, the SEC is suing Goldman for deceiving long-side investors in a transaction in which Goldman also took the long side. So Goldman conspired to defraud . . . itself?
Which leads us to the real impact of this case, which is political. The SEC charges conveniently arrive on the brink of the Senate debate over financial reform, and its supporters are already using the case to grease the bill's passage. "I'm pleased that the Obama Administration is using all of the tools in its arsenal to bring accountability to Wall Street and standing up for homeowners and small businesses across America," said Senate Majority Leader Harry Reid on Friday about the SEC case. "This is also why we need to pass strong Wall Street reform this year." Of course, this case matters to homeowners not at all.
So the Obama administration wants to give itself bailout power. That doesn't mean they'll use it, necessarily. It will likely depend upon how big the campaign contributions are, or whether the bailed are willing to promote some favored legislation.
Once they have "Bailout power" it's going to be all about who do you know. Influence peddling at its worst! Let the markets & bankruptcy deal with cleaning up the mess, out in the open, with profit maximization, loss minimization as the key drivers. :-D
Posted by: David Shea | April 19, 2010 at 10:06 PM