There’s one thing I know for sure about the SEC’s fraud charges against Goldman Sachs. I know I don’t know what really happened. I wasn’t in the shop in 2007 when the Abacus CDO in question was hatched, so until this thing gets settled, I don’t know for sure whether or not Goldman committed fraud.
But there’s one thing I do know. This is going to create a feeding frenzy.
Of all the people employed on Wall Street, the PR flaks are the ones that are definitely going to earn their bonuses this year. The fact of the matter is, people have been looking for two years for somebody to pin the blame on for the meltdown in the economy, and since Alan Greenspan apparently can’t be tagged, Wall Street’s as likely a perp as anybody. The SEC just painted a big red target on their expensive Italian suits.
And they just may be guilty to boot.
To be sure, there are so many culpable – from the home-owner who lied about his salary to get a loan to the bank that didn’t check the salary and gave him the loan to the Wall Street firm that packaged the loan in with other loans and resold it as a CDO to the ratings agencies that gave the CDO a triple-A rating to the regulators that turned a blind eye to it all to the central bank that blew out interest rates to spur it all along - it’s hard to pin the blame in any one place. So the mob looks to see who profited the most from the deception, and that’s who you blame. And nobody profited like the Street (even if in this case the Street metaphorically extends through Greenwich, Conn.)
In any case, it’s going to be hard for Lloyd Blankfein to claim he’s doing God’s work anymore. The Street’s built up quite a record for themselves over the years, and you wonder how close they are to the tipping point. From the Michael Milken/Ivan Boesky days, through the Frank Quattrone/Henry Blodget era, from analysts who never met a company that wasn’t a buy, to the earnings expectations game, to Lehman Brothers and Repo 105, to the insider’s joke that an NYSE seat is a license to steal.
I don’t know where they’d have to have the trial to find an untainted jury pool. Mars, maybe.