Scandal fuels legal cleanup
THE case being brought against Goldman Sachs by the US securities watchdog will boost Democrat efforts to pass tough new laws against Wall Street, Washington insiders believe.
The timing of the Securities and Exchange Commission’s (SEC) fraud allegations is fortuitous for President Barack Obama, who will this week try to force an ambitious finance reform bill through the Senate.
The bill would require hedge funds managing more than $100m (£65.2m) to register with the SEC. It would also mean derivatives would have to be traded on exchanges like shares, making the process more transparent.
Until now, the 41 Republicans sitting in the Senate have vehemently opposed the laws. Before the Goldman Sachs charges were made public, they wrote an open letter slamming the bill. The Democrats need at least one of their votes.
But top Republican Mitch McConnell later backtracked, saying finance reform was “not unfixable”. Experts say the nature of Goldman Sachs’ alleged offence – which involved opaque trades in collateralised debt obligations (CDOs) – will fuel public rage at Wall Street’s perceived profiteering and give the Democrats political momentum.
Doug Elliott, a former investment banker and current fellow at the Brookings Institution, said: “The public’s already angry. The focus on Goldman Sachs with these allegations just stokes that anger.”
Lawrence Mitchell, law professor at George Washington University, added: “The Republicans can rail all they want but it does put pressure on them to be more cooperative.”
US Treasury chief Tim Geithner has said he is “very confident” in the bill.
SENATE BANKING COMMITTEE CHAIRMAN
CHRIS DODD
AT President Barack Obama’s side in pushing through the finance reform bill is Chris Dodd. Head of the Senate committee that has already voted for the package, Dodd fiercely condemns Wall Street for “gaming” the system.
Yesterday he tried to ratchet up the pressure on his Republican opponents, claiming reforms would stop offences of the kind Goldman Sachs stands accused. “I don’t really believe Republicans want to be in a position where they are talking about filibustering this bill,” he added.
Republicans object to plans to set up a $50bn bailout fund for future crises, even though it would be paid for by the banks. But last night they seemed to be softening their rhetoric. Mitch?McConnell said the US public deserved a “strong bipartisan bill”.