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Journalism of Courage
It may appear unfair that Goldman Sachs,the giant investment bank,has become a catch-all for the worlds new contempt for Wall Street,and international finance in general. After all,they survived,and even prospered. But two things militate against sympathy for Goldman. First,prospering partly because their major competitors collapsed. And second,theres the fear that some of that prosperity and survival came because they profited off insider knowledge that the securities they sold were doomed to tank in value. And so theyre the focus of the US Senates bipartisan anger,and of endless jokes.
Goldmans indictment in the US for fraud for not telling investors that some of the securities they were selling were designed to fail comes at an intriguing time.
These provisions,however,are being questioned anew in light of what Goldman is accused of doing. If the allegations are true,goes this line of argument,how could they have been prevented by regulation without,that is,over-regulating the sector? Or should new law focus on ending fraud at the expense of fixing systemic problems in the West oversized banks,insufficient leverage and liquidity requirements,and tax loopholes? Perhaps the most telling accusation that the US is over-regulating by focusing on rules that,as we in India know,can always be circumvented by smart people,instead of on principles-based regulation,the preferred method elsewhere,including the UK. But principles-based regulation would require that regulators not be captured by those they intend to regulate. As another comic pointed out: Why are government employees filing a civil suit against Goldman Sachs? Thats just going to be embarrassing in a few years when they all go back to work at Goldman Sachs.
