Now that the initial excitement has died down a little bit and a closer look at the SEC’s complaint against Goldman Sachs has been taken, some have started wondering about the party on the other side of this transaction. Other than the pursuit of justice for all the little people, what motives might the SEC have had in filing a big, public lawsuit against Goldman Sachs?
It’s no secret that the agency has something to prove: Robert Khuzami told Congress as much when he was appointed director of the division of enforcement after the embarrassment that was the Madoff affair. The only way the agency might look like a “credible threat” to the people it oversees, he said in May of 2009, was to be unafraid of taking on big cases. And so they have! A number of banks did similar transactions, including Deutsche Bank, where Khuzami used to work as general counsel (does he own one of Greg Lippman’s T-shirts, we wonder?). But in targeting Goldman, whose absurdly evocative name has become synonymous with “Wall Street greed” of late, “the SEC picked a fight with the biggest kid on the block,” former SEC attorney Peter Henning told Bloomberg this morning. “That may be part of the message the commission wanted to send. It may help re-establish their reputation.”
Plus, the timing of this case is a little too good.
And: Is it maybe a funny coincidence that the charges against Goldman, charges they said they were blindsided by, were filed on Friday, the same day the SEC inspector general came out with an embarrassing report about the SEC’s negligence in the case against Texan billionaire Allen Stanford? According to yesterday’s Journal:
Capital letters aside, putting someone from inside the firm in the same box as kooky Harry Markopolos doesn’t look so good. Meanwhile, Republicans are questioning the timing of the case and have suggested, quite strongly in the case of Darrell Issa, that the Democrats are using it to make a financial-services regulatory-reform bill through the Congress.
His argument is buoyed by the fact that directors from the agency split along party lines when voting whether to pursue the case, with Democratic commissioners Elisse Walter and Luis Aguilar voting for, and the two Republican commissioners, Kathleen Casey and Troy Paredes, voting against. SEC chairman Mary Schapiro — a registered Independent — sided with the Democrats, but we think that probably wasn’t political and had more to do with the fact that financial regulation would make her job a hell of a lot easier.