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Originally Posted by TheMercenary
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A bit of recent history:
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In 2004, at the request of the major Wall Street investment houses—including Goldman Sachs, then headed by Paulson—the U.S. Securities and Exchange Commission agreed unanimously to release the major investment houses from the net capital rule, the requirement that their brokerages hold reserve capital that limited their leverage and risk exposure. The complaint put forth by the investment banks was of increasingly onerous regulatory requirements—in this case, not U.S. regulator oversight, but European Union regulation of the foreign operations of US investment groups. In the immediate lead-up to the decision, EU regulators also acceded to US pressure, and agreed not to scrutinize foreign firms' reserve holdings if the SEC agreed to do so instead. The 1999 Gramm-Leach-Bliley Act, however, put the parent holding company of each of the big American brokerages beyond SEC oversight. In order for the agreement to go ahead, the investment banks lobbied for a decision that would allow "voluntary" inspection of their parent and subsidiary holdings by the SEC.
During this repeal of the net capital rule, SEC Chairman William H. Donaldson agreed to the establishment of a risk management office that would monitor signs of future problems. This office was eventually dismantled by Chairman Christopher Cox, after discussions with Paulson. According to the New York Times, "While other financial regulatory agencies criticized a blueprint by Treasury Secretary Mr. Paulson proposing to reduce their stature — and that of the S.E.C. — Mr. Cox did not challenge the plan, leaving it to three former Democratic and Republican commission chairmen to complain that the blueprint would neuter the agency."[12]
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The Paulson above was Henry Paulson, the CEO of Goldman Sachs thought 2006 at which time he became
Bush's Sec. of Treasury (no relation to John Paulson/Paulson Hedge Fund)
And was instrumental in one of his first act's as Treasury Sec., along with Chris Cox, Bush's SEC Chairman, of gutting SEC's regulatory oversight of the "net capital rule"
Securities fraud charges against Goldman Sachs are just the beginning of steppped up SEC (and DoJ) investigations of the fraudlent practices of the 2000s, when there was virtually no oversight.
It seems to me to be a good thing that the SEC doing its job rather than gutting and ignoring its oversight responsibilities.
Thats all for now.
