SEC Charges Goldman Sachs With Fraud

Flickr/<a href="http://www.flickr.com/photos/nesster/1799608760/">nesster</a> (<a href="http://www.creativecommons.org">Creative Commons</a>).

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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!)

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THIS IS BIG FOR US.

And we won't beat around the bush: Our fundraising drive to finish our current budget on June 30 and start our new fiscal year on July 1 is lagging behind where we need it to be.

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If you're new to Mother Jones or aren't yet sold on supporting our nonprofit reporting, please take a moment to read Monika Bauerlein's post about our priorities after these chaotic several years, and why this relatively quiet moment is also an urgent one for our democracy and Mother Jones’ bottom line—and if you find it compelling, please join us.

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