Sane participants in the economy, admittedly a minority but a large one, are rejoicing over the SEC’s attack on Goldman Sachs, the worst of the worst and thus the richest of the rich on Wall Street.
Goldman Sachs, whose tactics exiting the collapsing subprime mortgage market have been under government scrutiny for months, now faces federal fraud charges that it duped investors into losing $1 billion on a rigged offshore deal pegged to dicey home loans.
The suit, brought Friday by the Securities and Exchange Commission, accuses Goldman and one of its vice presidents, 31-year-old Fabrice Tourre, of allowing a Wall Street hedge fund to secretly select many of the securities in the deal.
The hedge fund, Paulson & Co., then bet that those subprime mortgage securities would fail. When they did, Paulson made a $1 billion profit and investors lost more than $1 billion, nearly all their money, the complaint charges.
Wow, it’s great to see a vigorous SEC enforcing the laws and calling the influential to account. We need more of this. A good many of our recent problems happened not because we don’t have laws but because we don’t enforce them, so this is an encouraging sign.
The timing is great on the filing, too, though it’s probably just coincidence.
Years before federal regulators shut down billionaire Allen Stanford’s businesses in a massive fraud case, agents strongly suspected that he was running a Ponzi scheme but waited nearly a decade before seriously investigating his troubled banking empire, an internal report found.
In a report released Friday, federal auditors blamed the Securities and Exchange Commission — including powerful industry influences — for the long delay in investigating the network of companies now blamed for one of the largest frauds in U.S. history.
“The SEC’s Fort Worth office was aware since 1997 that Robert Allen Stanford was likely operating a Ponzi scheme,” said the SEC’s Inspector General’s Office, adding that “no meaningful effort was made by enforcement to investigate.”
Like the case of convicted swindler Bernard Madoff, the scathing report offers yet another reminder of the breakdowns in regulatory oversight that allowed a major fraud scheme to flourish for years.