There Oughtta Be a Law

When news of the Goldman Sachs scandal broke last week, some rightie bloggers had a question for which I did not have a ready answer. If what Goldman Sachs did was so bad, they asked, why did the SEC file a civil suit instead of criminal charges?

The answer seems to be that what Goldman Sachs did probably isn’t criminal — not because it wasn’t really, really bad, mind you, but because no U.S. law exists to cover exactly what Goldman Sachs appears to have done. Richard Adams writes at The Guardian, “the real scandal here isn’t what’s illegal but what’s legal.”

Zachary A. Goldfarb and Tomoeh Murakami Tse write for the Washington Post that Goldman Sachs and the SEC for months “had been involved in secret talks over allegations that the Wall Street bank defrauded customers in selling them investments designed to fail.” Last month the two sides reached some kind of impasse, and the SEC filed the suit to break the impasse.

Further, the SEC had notified Goldman Sachs last summer that it might file the suit. So this has been going on for a while. It’s not clear to me precisely what was being negotiated, however.

14 thoughts on “There Oughtta Be a Law

  1. Sometimes rightees seem to think that all law is timeless and was etched on tablets by Moses, and consequently that the loopholes are there for the taking no matter what the consequences to others. There’s profit to be made in the lack of safety and even calamity.

    On the other hand, something like healthcare standards, being Socialism warrant arming oneself like a Navy Seal who’s infiltrating a terrorist stronghold. That borders on insanity and leas to public forums or events where no reasonable parent would want their kids going without an armed escort.

  2. The recent implosion of our economy has moved me to tune into the Stock Exchange channel once in a while. I’ve come to the temporary conclusion that the financial sector is made up of lots of people who make their livings by selling things – primarily, if not exclusively, pieces of paper. People sell cars, real estate, toasters, insurance, widgets – Street types sell pieces of paper, the monetary worth of which varies from day to day depending on the value which is ultimately, and seemingly arbitrarally, determined by the people selling them.

    Let me explain. A tout gets on the Tube advising the watcher to put his money on this stock. If enough people take his advice and buy, the value of the paper (stock) goes up. Or, don’t buy and enough people sell, the value of the paper goes down. All this, when actually the intrinsic value of what the paper represents hasn’t changed one iota.

    Not to question Richard Adams, but it seems to me that legal/illegal really have no meaning when it comes to the workings of the Street.

  3. Look at O.J. Simson’s run in with both the criminal and the civil law. It probably has something to do with the burden of proof required and the SEC not knowing exactly what individuals committed the fraud. But they know a fraud was committed.

  4. If what Goldman Sachs did was so bad, they asked, why did the SEC file a civil suit instead of criminal charges?

    I don’t think the SEC has the juristiction to file a crimminal complaint. It wasn’t the SEC that Bernie Madoff in jail it was the justice department.

  5. Here’s the thing they never seem to get:

    OK, fine. It was all legal. Everybody goes free; no one loses a cent.

    Now. Are you gonna invest with Goldman Sachs? With anyone? I’m not. A lot of people aren’t.

    If they don’t wanna pay any penalties, fine. But what’s at stake here, what they can’t bully their way out of, is the public’s trust – more accurately, their willingness to give them any more money of theirs to play with. Then it’ll be just like the late ’60s and early ’70s, when the financial market was some exotic thing that you could make money at if you were willing to make it a second full-time job, but that the average person can’t be bothered with.

    They like to think that all that money just appears; it doesn’t.

  6. I asked question on a poll in NY and PA on Sunday about private industries taking over government functions. Most people were A-ok with it until you asked them a couple of quetions:
    How do you feel about private companies providing drinking water?
    And how do you feel about private companies being responsible for waste water?
    A long pause, then, many people saying ok to both. But most had a problem with one/both of these issues. ME? I think both of these ideas are Terrible, to Horrible, to the Stupidist thing I’d ever heard of, damn near, until about 10 years ago, when the bar was set to a level where anyone with an opposable thumb would have laughed at the consequences of the idiocy. And yet, we forged right on ahead!
    Then the question was asked whether people would feel ok about Bank of America or Goldman Sachs providing the money. Everyone, and I mean, EVERYONE!, had the same observation. It just ranged from “No” to “Hell NO!” to “Fuck NO!!!”
    The American people have spoken!
    If the Democartic leadership doesn’t pick up on this, someone needs to check to see if they still have opposable thumbs, and if they do, to make sure that they’re not stuck up their own asses.

  7. I think one of Christopher Lloyd’s FINEST ever performances was as “Doc Brown” in “Back to the Future.” Any Canadian readers out there willing to rent out their garden shed? ‘Cause like that’s SUCH a step up from the refrigerator box with duct tape I’m planning on now if Romney/Paul/Gingrich/Palin win in 2012. What Mayan calendar? What? Oh maybe I won’t need that garden shed after all – carry on.

    Laws? Where we’re going, we don’t need laws.

  8. I don’t think GS expected anything would REALLY happen. They are even more closely linked to Democrats than Republicans, they contributed heavily to the winning side in the last campaign. Case Closed, they expected.

    This is going to be a HUGE shock to the Wall Street system that hasn’t reacted well to Obama’s anti-Wall Street speeches even when they didn’t believe he meant it. This is much worse. He actually took action against the darling of WS (measured by the only thng that matters – $$$$).

    As I understand the history, when FDR took on Wall Street, they closed ranks against him for years through the Great Depression. It may well be that the communal financial organism of New York will react. Watch the money flow for a radical shift – on in 2010 and for 2012.

  9. Once the immoral act was defined and realised it wasn’t illegal, the SEC or Justice Dept. could’ve had a new law put on the books and THEN prosecuted G$.

    • hidflect — “Once the immoral act was defined and realised it wasn’t illegal, the SEC or Justice Dept. could’ve had a new law put on the books and THEN prosecuted G$.” Um no, the SEC and Justice Department doesn’t have the constitutional authority to do that.

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  11. G.S. happens to be a global operator. Other countries have different laws. Many of those countries are highly incensed right now and, thanks to the SEC suit, smelling blood in tthe water. If the U.S. can’t nail G.S. and its ilk, Germany,France and a number of other countries are checking their laws as we speak.

    The new outpouring of bonuses for G.S. folks was nothing more than a C-student attempt to say, “See how much money we’re ;making? You investors are going to lose all this lovely money if the Fed takes us down”

    How does the federal government take out an opponent too big to fail? Starts with a single rock tossed from the top of the cliff, carefully calculated to gather boulders and scree until it generates a landslide.

    At least that’s my take on it anyway. But I’ve been wrong before.

  12. I’m struck through all of this just by what it says about our overall economy. In the beginning our economy was defined by a bunch of people on small parcels of land who farmed and were generally self-sufficient. For this our political philosophy was defined by Jefferson and his concepts of having lots of independent law makers for each specific community, “Jeffersonian Democracy.”

    As the industrial revolution began we evolved into a more urbanized society with people working in factories building or manufacturing stuff. That era had many shortcomings in terms of how people were treated in these new factories and where workers lived. Eventually our political ideals shifted into the Progressive era. Progressives began workers unions, instituted shorter work weeks, safer work environments, and eventually improved environmental laws. The fact that many of these factories with inadequate working conditions were shipped to other nations is ignored.

    In the last 20 or 30 years our economy has shifted again. Today we trade computer dots and occasionally paper. The profits are based on assumed values – not necessarily any real value. Since the economy is not based on anything real the political ideals were again shifted. Today the political ideals formally sanction the process of cutting off our nose to spite our face (collectively). If something is perceived to costs too much money for a government, it is handed to a corporation so they can sell it as a commodity. The bottom line: our life has gotten so complex no-one can understand what is happening anymore.

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