The lawsuit filed by the SEC against Goldman Sachs, the “great vampire squid wrapped around the face of humanity,” could be the beginning of some kind of accountability for the financial crisis that led to the Great Recession we are currently not enjoying. Paul Krugman puts what happened in layman’s terms.
We’ve known for some time that Goldman Sachs and other firms marketed mortgage-backed securities even as they sought to make profits by betting that such securities would plunge in value. This practice, however, while arguably reprehensible, wasn’t illegal. But now the S.E.C. is charging that Goldman created and marketed securities that were deliberately designed to fail, so that an important client could make money off that failure. That’s what I would call looting.
That’s what I would call it too. More attention needs to be paid to the reprehensible-but-not-illegal aspect of the whole financial crisis. What gets me the most is that, during the 1980s and 90s, the Republican Congress (with the help of a lot of Democrats, including Bill Clinton, who now says he made a mistake) gutted and/or bypassed the financial regulations put in place during the Great Depression. These regulations, such as the Glass-Steagal Act, had protected us for half a century from the wild swings that are a characteristic of unregulated markets.
The Democrats in the current Congress are now attempting to come to grips with regulating the financial industry. The usual suspects are screaming bloody murder (Wall Street, Republicans, right-wing commentators). The biggest danger is that, like with Health Care Reform, too little will be done to really fix the problems, but some progress will be made. Well, no, the biggest danger is that the Republicans and their Democratic enablers will prevent anything from being done, and we’ll just stay on this roller coaster until it flies off the tracks completely.
