SEC Shows its Soft Side with Goldman

In an opinion piece in the Financial Times, Professor Theodore Rinehart of George Washington University Law School argued that the SEC “blew a perfect opportunity to redefine its role” by agreeing to settle its action against Goldman Sachs for misleading investors in a subprime mortgage security for $550 million.  By settling the case so soon, the SEC failed to “set a wider regulatory precedent” and make “necessary cultural changes on Wall Street that might at least diminish the chances of future crises.”

Without forcing Goldman Sachs make management changes and admitting wrong, the SEC has signaled to Wall Street that it is “unwilling to carve out a wider regulatory role” and large financial firms have “little to fear from SEC lawsuits.”  If the SEC would have pushed Goldman Sachs more, it would have restored “its reputation as America’s premier regulatory agency” and put bankers on notice that “it is by public privilege, not divine right that we permit them to run their businesses.”

We whole heartedly agree with Professor Rinehart that the SEC just let a good one get away.  The prosecution of Goldman Sachs would have shown to Wall Street that the country cannot afford another financial crisis.