The left-wing Obama administration and the left-wing Gordon Brown administration in the United Kingdom are using the Wall Street investment firm Goldman Sachs as a football. It looks like they are having fun kicking it around and these leftists are hoping that they can stoke populist outrage to improve their sinking political fortunes.
Brown, currently facing a tough re-election battle, seemed additionally angry at Goldman Sachs’ plan to pay 3.5 billion pounds ($5.4 billion) in bonuses as reported in British newspapers.
“I am shocked at this moral bankruptcy,” he said on BBC TV. “This is probably one of the worst cases that we have seen.”
Brown called for a “new global constitution for the banking system” that would, among other things, ban bonus packages like the ones planned by Goldman Sachs.
The U.S. charges against Goldman Sachs relate to a complex investment tied to the performance of pools of risky mortgages. In a complaint filed Friday, the Securities and Exchange Commission alleged that Goldman marketed the package to investors without disclosing that the pools were picked by another client, a prominent hedge fund that wanted to bet the U.S. housing bubble would burst. Within months, most of the mortgages had been downgraded as the U.S. housing boom went into reverse and the securities fell sharply in value.
LUKE SAYS: While Goldman Sachs must battle with the government’s civil fraud charges, it must also fight to retain client confidence.
Goldman Sachs has been the most successful of the investment banks in dealing with the credit crunch and recession of 2007-2009. Now Obama is using this case to rebuilt the Democrats political fortunes.
The Securities and Exchange Commission’s bombshell civil fraud charge against Goldman has tarnished the Wall Street bank’s already bruised image, analysts say. It could also hurt its ability to do business in an industry based largely on trust.
Damage from the case could hit other big banks as well. The SEC charges are expected to help the Obama administration as it seeks to more tightly police lucrative investment banking activities.
Goldman has denied the SEC’s allegation that it sold risky mortgage investments without telling buyers that the securities were crafted in part by a billionaire hedge fund manager who was betting on them to fail. A 31-year-old Goldman employee is also accused in the civil suit that was announced Friday.