The Wall Street Journal explains how one of the coziest industry regulators, Mary Schapiro of the SEC, is now trampling the rule of law in order to win political points.
Given all of the fraud that is actually out there in the mortgage crisis, it speaks volumes that the SEC Chairman could not muster a unanimous Commission vote to target Goldman Sachs.
The Journal makes the point that Goldman is on the defensive – of course, what choice do they have when the government adopts the tactic of strike suit class action lawyers?
Reform of the financial markets – such as eliminating the exemptions that enabled the housing bubble to form – are necessary. I argued that point in a recent Huffington Post piece with Jeff Madrick. But prosecuting bankers after the fact for what was and is legal is the wrong way to go.
When one pairs this SEC behavior with the hysterical atmosphere being created by populist bloggers like Yves Smith on Naked Capitalism we have reason to be concerned about a new form of authoritarian politics emerging in America.
Commissioner Paredes is to be applauded for standing up to Schapiro’s gambit.