Browsing the blog archivesfor the day Monday, April 19th, 2010.

Rackets and Racketeers

Financial Crisis

The latest on the Goldman Sachs scandal:

Paul Krugman writes in “Looters in Loafers” that the financial reforms being promoted by the Obama Administration would have gone a long way toward restraining Goldman Sachs from defrauding its clients. However, he also suggests adding language to the bill to specifically prohibit “Producers”-type scams.

He notes also that Republicans continue to talk about “bailouts” as if that were the only issue at hand:

The main moral you should draw from the charges against Goldman, though, doesn’t involve the fine print of reform; it involves the urgent need to change Wall Street. Listening to financial-industry lobbyists and the Republican politicians who have been huddling with them, you’d think that everything will be fine as long as the federal government promises not to do any more bailouts. But that’s totally wrong — and not just because no such promise would be credible.

For the fact is that much of the financial industry has become a racket — a game in which a handful of people are lavishly paid to mislead and exploit consumers and investors. And if we don’t lower the boom on these practices, the racket will just go on.

See Vicky Ward, “Senior Goldman Exec Is Married to Former Head of ACA.” ACA would be ACA Capital, the selection-manager-of-record of the infamous Abacus Fund. ACA asked John Paulson to choose the bonds included in the fund, allegedly without realizing John Paulson would be enriched if the Fund failed. The president of ACA is the husband of the managing director and deputy general counsel of Goldman Sachs.

And the New York Times is reporting that senior executives at Goldman Sachs were playing an “active role” in the mortgage unit as the mortgage market began to go south.

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