On this edition of Peter Lavelle’s ‘CrossTalk’ he asks his three guests including me whether the US Senate hearings humiliating Goldman Sachs are merely a show trial with the aim of watering down global financial reform. Take a look at what we have to say in the video below.
The point where I got cut off by commercial was where I was making the point I made in my post "Goldman’s public purpose and where I have problems with the Abacus deal." Goldman was originating a transaction, prospectus and all. That’s not making a market.
Goldman was not acting in the secondary market. That means they have an obligation to their buy side clients which they do not when they are acting as a market maker. In my view, they did not fulfil this obligation in the Abacus AC1 deal by not adequately disclosing Paulson and Co.’s role in the transaction.
Does that mean Goldman necessarily committed fraud? No. But a jury will decide if they did.
Update: Oh, and, I failed to get in a dig at government here because they are ultimately responsible for making the laws. As your elected representatives, Congress can do anything it wants within the limits of the constitution, individual members constrained only by election. If they want to confiscate your gold, they can do and have done. If they want to increase taxes, again that is their prerogative. If they want to enact regulations to constrain actors in the financial services arena, no one is stopping them. And they can always, always force regulators to do their jobs and regulate. So read my post "Forget about Goldman" if you are thinking about government’s role here.