Thursday, April 22, 2010

Financial Reform

Apologies for neglecting this blog over the past month. Since the health care bill passed I haven't had much to say about prominent issues (though I still insist that we need universal health care and I am not satisfied with the bill).

Well, the S.E.C. lawsuit against Goldman Sachs and the clear intentions of Obama and Congressional Democrats to institute meaningful financial reform have given me something to reflect upon.

Obama gave a timely speech this week in New York outlining his basic financial reform plan. I thought he did a pretty good job not only laying out his ideas, but also making an argument that banking lobbyists have promoted a false choice between free markets or strangled economy.

To me, these reforms are pretty modest, but they would go a long way at protecting consumers. Limiting executive bonuses, restricting risky investments, calling for greater transparency on derivatives, allowing shareholders a larger say in organizational policy, and shrinking the size of large banks are all good ideas. My feeling is that such measures would help get us off of this boom/bust cycle and back to something more stable, which is more desirable for most people.

This speech comes on the heels of the S.E.C.'s charge that Goldman Sachs fraudulently misled its customers into investing in mortgage-backed securities that the organization knew were worthless. On top of that, Goldman Sachs took out insurance on these securities, essentially betting that they would fail. Turning to our good friend, Jon Stewart...these fucking guys:

The Daily Show With Jon StewartMon - Thurs 11p / 10c
These F@#king Guys - Goldman Sachs
Daily Show Full EpisodesPolitical HumorTea Party

It's insane to me that the scenario described above might actually be legal. Even The New York Times is reporting that the S.E.C. may actually have a difficult case in proving Goldman Sachs committed a crime. That is simply unreal.

One of the company's main arguments is that it didn't actually turn a profit on these investments, but that doesn't make its actions any less wrong. That's like saying you shouldn't be charge for robbing a bank because the money fell out of your van during the getaway.

Still, I think this legal battle is a win-win, largely because the story is too big to ignore and its implications are too great. Goldman Sachs has to fight the charges to maintain any credibility. If Goldman Sachs loses, then there is concrete proof that Wall Street banking firms are committing fraud and should thus be regulated further. If Goldman Sachs wins, people will be pissed off that what the company did is actually legal and -- hopefully -- demand reform.

What I don't understand is Republican opposition to even discussing tighter regulation. To some degree or another, most national politician are in bed with these guys, but that doesn't mean you have to get fucked. This move is political suicide. Anger at the financial district is probably the most bipartisan emotion in this country. I could understand defending them through argument (at least in theory), but to not even allow the argument to be made is just nuts. More than anything, I'm curious to see what the Republicans have up their collective sleeve on this one.