Sun, 18 Apr 2010

The implications of Goldman's defence

So this is how it was done:

...it [Goldman Sachs] says that the normal practice of a market maker ... is not to "disclose the identities of a buyer to a seller and vice versa".

This goes well beyond a conflict of interest or the appearance of impropriety. This is a recipe for fraud. The only people who could consider this as "normal practice" are con artists.

I'm not a proponent of more "regulation" of financial (or any other) markets - I'd be more than happy if common law (and common sense) was applied as it should be. But the fact that the suit against Goldman for this outright ripoff is civil rather than criminal shows that the government has no intention whatsoever of applying either law or sense - they'd rather handle it through "regulation", with plenty of wiggle room for the accused and no possibility of real punishment for the "convicted".

How much more corruption can the system tolerate before it simply collapses in on itself?

Goldman Sach's response to the SEC's fraud charge shows that probably the best way to see the SEC's action is as an attack on one important aspect of the leading investment bank's business model - which, of course, probably makes the charge more significant than the narrower allegation that it committed a single billion-dollar crime.

(link) [BBC]

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