All those billions in profits, particularly when it comes during a downturn, certainly raises suspicion and, in the case of Goldman Sachs, the indisputable leader on Wall Street, government scrutiny as well. First the threat of regulatory scrutiny came from the SEC. But, as is too often the case, the SEC’s appetite for enforcement can be sated with a mouthful of low hanging fruit. After just a few weeks of brinksmanship, the SEC was satisfied with a fine/judgment of $550 million. Playing the victim, Goldman bemoaned the size of the settlement, but more than likely behind closed doors they were thrilled with the result and happy to pay what is, for a firm of Goldman’s size and profitability, chump change.
But now comes the “Main Event”. The Department of Justice and criminal subpoenas. Ouch. Nothing like the threat of jail to get you focused. The Wall Street Journal reports that DOJ will likely issue subpoenas to Goldman executives in an effort to learn more about the firm’s mortgage-related business.
All of this following a cruel April for Goldman Sachs where The Senate Permanent Subcommittee on Investigations issued a 639-page report that accuses the powerhouse firm of making bets against the housing market, misleading investors, and (here’s the shocker) putting its own interests ahead of those of its clients. The Law Blog reports that Senator Carl Levin has called for the criminal investigation of Goldman Sachs – A refreshing reminder to MainStreet that there are still those willing to hunt the cause of ruin. Expect DOJ to be tougher than the SEC, especially with the power of criminal charges in its arsenal.
A DOJ investigation is a sobering experience for all involved. Lanny Breuer, head of the Criminal Division, and his team are no pushovers. They will not be intimidated by Goldman or its phalanx of white-collar specialists; but I wouldn’t hold my breath for any indictments, Raj Rajaratnam-style. As far as I know, DOJ has no wiretap recordings of Goldman partners scheming illegally and blatantly. These guys are just too damn smart. And the last time I checked, smart, savvy — and throw in greedy for good measure — are not crimes.
Assisted by Zachary Kady