Goldman Suit Exposes Big Banks to Firestorm

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"If you assert. . .Goldman defrauded its customers, you have implicated every bank in the big leagues."

Now we learn that the SEC split 3–2 over whether to go after Goldman Sachs in court. Supposedly, the regulatory agency prefers unanimous votes when bringing enforcement actions against the firms it regulates. Why the exception this time? The Wall Street Journal made it sound like it was simply partisan politics that carried the day (i.e., the SEC's two Republicans voted against suing Goldman for civil fraud, but the three Democrats prevailed). That is superficially what happened, and it's as much of the story the SEC is willing to divulge right now. But it's bound to leave many observers who are out to pillory the bankers, with the impression that the two Republicans were merely looking out for their fat-cat buddies on Wall Street. This thought occurred to us as well, so we'd have to concede it is at least possible.

But might there have been another reason the Republicans backed away from bringing formal charges against Goldman? We think there is and that it goes to the heart of the corruption in which the world's largest banks have inextricably trapped themselves. For if you assert in a of court law that Goldman defrauded its customers, you have implicated every bank in the big leagues. Enabled by their respective central banks, they all—even the ones run by otherwise spotless Swiss Burghers—play the same ponzi game. Moreover, regardless of whether the charges brought against Goldman are civil or criminal, they will open the door to an endless flood of litigation with the potential to bring down the entire banking system. From this point forward, Goldman will be fair game for every aggrieved city, county, state, sovereign fund and class of investor they have done business with for the last decade. The same goes for Bank of America, J.P. Morgan, Morgan Stanley, Deutsche Bank et al.

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