The SEC takes heat over the Goldman suit

Larry Ribstein —  23 September 2010

Per the WSJ, the SEC’s internal watchdog told the Senate Banking Committee that the SEC’s suit against Goldman was a “suspicious” attempt to “to distract attention from a report criticizing the SEC for failing to detect an alleged Ponzi scheme.”

It’s not like I’m surprised.  Here’s my criticism of the suit and the settlement

The only surprise (though perhaps it shouldn’t be) is the reaction reported in the WSJ article:  that we should have more litigation.  The SEC’s suit was intended not just to cover up its own negligence, but as a misguided response to satisfy the public craving for “accountability.”  Yet the pressure for more such suits continues according to the article:

Senator Kaufman (Del.):  “[We have seen very little in the way of senior officer or boardroom-level prosecutions of the people on Wall Street who brought this country to the brink of financial ruin. Why is that?”

Fred Gibson, FDIC deputy inspector general:  “There hasn’t been a prosecution that’s put a face on this crisis.”

Former SEC enforcement chief McLucas puts his finger on the problem:

“One of the challenges in this environment is there were such broad systemic failures that identifying the one or two people or the six enterprises that are quote responsible, which is what we see a broader appetite for, I don’t think that’s doable. There may be cases where the rules were broken. Are they all cases where you can or should put people in jail? Probably not, but that doesn’t satisfy the lust for accountability.”

So it looks like, despite the criticism of the SEC Goldman suit, we’re in for more of the same.

Larry Ribstein

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Professor of Law, University of Illinois College of Law

2 responses to The SEC takes heat over the Goldman suit

  1. 

    I was particularly disappointed by the medieval need for a prosecution to “put a face on this crisis.” Someone should just come right out and say we need a scapegoat so we can all feel better about ourselves.

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