Simon Johnson, "Our Pecora Moment:"
We don’t know where and when, but the SEC action points in one direction only: Lloyd Blankfein (CEO of Goldman) in the witness box, while John Paulson (unindicted co-conspirator) waits in the on-deck circle.
Either Blankfein knew what was going on – and is therefore liable before the law – or he was clueless and therefore incompetent. Either way, the much vaunted risk management and control systems of Goldman, i.e., what is supposed to prevent this kind of thing from happening, are exposed to be what we have long here claimed: bunk (as I argued with Gerry Corrigan, former head of the NY Fed and long-time Goldman executive, before the Senate Banking Committee when we both testified on the Volcker Rules in February).
“Too big and complex to manage” is actually the best defense for Goldman’s executives and they should offer to break up the firm into smaller and more transparent pieces as a way to settle the firm’s liability with the SEC. The current management of Goldman – along with the team that ran the firm under Hank Paulson – have destroyed the value of an illustrious franchise. Goldman used to stand for something that customers felt they could trust; now it is just a sophisticated way of ripping them off.
John Paulson obviously knew what he was doing in helping to create the “designed to fail” securities – and the consequences this would have. If he cannot be convicted of conspiracy to commit fraud, then the law in this regard needs to be tightened significantly. (read more)
Update: Genuine populists out there (as opposed to those fringe radical dimwits identifying themselves with the name of a certain gay sex act) who maintain their righteous fury at the criminals in our financial industry (and recognize in decades of corrupt Republican policy the elitist big government corporatism that will never ever begin to resemble the source of any real change), should probably follow this man's advice and make some phone calls now. I did.