Rarely does one see a more perfect illustration of the Obama administration’s tortured relationship with Wall Street.
On August 9, the Justice Department and the SEC both announced the end of investigations into potential criminal behavior related to Goldman’s handling of mortgage-backed securities in the runup to the financial crisis. That same day, the Center for Responsive Politics reported that Goldman’s employees had switched from giving 75 percent of their campaign donations to Democratic candidates in 2008 to giving 70 percent of their donations to Republicans in 2012.
That’s called having your mortgage fraud cake and eating it too.
Whether motivated by sheer pique at Obama’s mildly derogatory comments about “fat cat” bankers, or annoyed by his calls to raise their taxes back to the perilous heights of the Clinton years, or simply incensed at Dodd-Frank’s potential inroads against Goldman’s profit machine, the much put-upon employees of the world’s most famous investment bank are giving Democrats the cold shoulder. At the very same time, a Democratic administration is sending up the white flag of surrender, acknowledging that it simply can’t bring Wall Street to account for its misdeeds before and during the financial crisis.
And misdeeds there were, as the 635-page Levin-Coburn report on the financial crisis, which was released in April 2011, makes clear beyond any reasonable doubt. Goldman knew that the mortgage-backed securities it was packaging together were crap. Yet, it sought out suckers to sell the trash to and cashed in by betting that the products it was packaging and selling off would implode in value. Sure, everyone on Wall Street was engaged in the same games — the big difference with Goldman was that they were much, much better at it, and got out while the getting was still good.
Unfortunately, what seems clearly obvious to the normal person does not appear to translate into a slam-dunk court case, in the judgment of Department of Justice prosecutors faced with the daunting prospect of tackling the best-that-money-can-buy legal defense sure to be marshaled by Goldman. There’s surely a nugget of truth there. Wall Street did a very effective job in the 1980s and 1990s of ensuring that the rules governing their behavior were as lax as possible, but it still feels pusillanimous. And the cowardice completes a circle because one of the key reasons why Goldman’s campaign contributions are now flowing to Romney is his promise to repeal the Obama administration’s primary effort to prevent future financial sector misbehavior: Dodd-Frank.