The Politics of Suing Goldman Sachs

The White House denies having a hand in the SEC suit, but there are doubters

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Just around the time Democrats needed an extra push to pass financial reform something big happened. On Friday, the Securities and Exchange Commission filed a stunning civil suit against Goldman Sachs alleging fraud. The investment bank has long been the SEC's "white whale" but political observers also noticed how convenient this was for the Obama administration's legislative goals. Still, others noted Goldman's deep financial ties to Obama, which would seemingly allow it to escape the SEC's heavy hand. What dynamics are at play?

  • The White House Had No Role, insists Press Secretary Robert Gibbs: "We play no role in what the SEC does... It's an independent agency."
  • Of Course It Did, counters Eliot Spitzer, the former Democratic Governor of New York. "This was not a coincidence" says Spitzer, referring to how Democrats are now trying to push financial reform. "There are no coincidences in this world. None." He says this despite the fact that the White House and the SEC are forbidden by law from working with each other in this way.
  • It Smells 'Fishy,' writes Dan Indiviglio at The Atlantic: "It's hard to imagine better timing. The financial reform debate is finally hitting Main Street after brewing in the halls of Congress and the Treasury for months. Democrats and progressive groups are trying to get average Americans riled up about regulating Wall Street. The Senate could begin formal debate on the floor as soon as this week...The timing is a little hard to believe."
  • Why Go After Goldman Instead of Paulson? asks Andrew McCarthy at National Review: "Unless the SEC has more than what is laid out in its complaint, this isn’t fraud. It’s politics. If you want to talk material omissions, to charge Goldman but not charge Paulson is pretty darn material. If what Goldman was selling was fraudulent, it can only be because what Paulson manufactured for sale was fraudulent. The two were in cahoots. If what Paulson did was perfectly lawful, Goldman can’t be legally culpable for helping him do it."
  • But Goldman Practically Owns the Democrats, notes the Wall Street Journal: "Goldman's political action committee and its employees ranked second among corporate donors to AT&T Corp. in total campaign donations—$31.6 million. Nearly two-thirds of the money has gone to Democrats, making Goldman the largest corporate source of campaign donations to Democrats... So far during the 2010 congressional elections, Democrats dominate the list of top recipients of donations from Goldman's PAC and employees."
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