Some relics of the financial crisis refuse to die. Today Goldman Sachs revealed that it has received more subpoenas related to Abacus and other collateralized debt obligations made during the mortgage boom. Yes, Abacus, the same instrument Goldman paid out a $550 million settlement after the SEC accused Lloyd's Boys of creating a product intended to fail. Although Goldman disclosed as far back as late March that regulators were looking into Abacus again, a subpoena is a much more serious step, especially considering Abacus was the first time that the firm had ever, in 142 years, been accused of fraud. But it's not the only monster that won't go away.
Worries over banks that were "too big to fail" were supposed to die with the Dodd-Frank financial reform. But those have also been reanimated. The GOP, which plans to undermine the bill with "what detractors call death by a thousand cuts," is doing its part to repeal Dodd-Frank and the restrictions it puts in place. But even as the legislation stands, hedge fund founder Ken Griffin — speaking at Michael Milken's annual "Davos of the West Coast" financial conference — says Dodd-Frank is “going to deeply entrench crony capitalism into the very fabric of our financial system, which I am terrified about.” According to Dealbook:
"While the debate over Too Big to Fail seems to have lost steam, it shouldn’t. Listening to this group, it is clear that there will be another financial crisis — and possibly sooner than we expect."
Crappy days are here again!
Goldman Faces New Legal Woes [Dealbook]
Republicans Propose 'Tweaks' To New Financial Rules [NPR]
Dodd-Frank Dissenters Sound Off [Dealbook]