Playing The Blame Game

The U.S. government’s lawsuit against Wall Street investment giant Goldman Sachs for alleged fraud raises serious questions about financial ethics in this country but also about the role of regulators in our lives.

The U.S. Securities and Exchange Commission recently charged Goldman Sachs with "defrauding investors" over subprime mortgage securities, which were largely blamed for the worst financial crisis since the Great Depression of the 1930s. The government agency responsible for regulating the U.S. financial market alleged that Goldman Sachs failed to disclose crucial information to investors who ultimately suffered a loss of some $1 billion.

Some media reports say the SEC, blamed previously for not discovering the $50 billion Ponzi scheme of former stock broker and investment adviser Bernard Madoff in a timely fashion, was determined to crack down on Goldman Sachs in a bid to bolster its reputation and restore public confidence in the agency.

Goldman Sachs, in denying the SEC allegations, vowed to fight for its reputation. "The SEC's charges are completely unfounded in law and fact, and we will vigorously contest them and defend the firm and its reputation," the investment bank said in a statement.

GS Chief Executive Lloyd Blankfein is required to attend an April 27 inquiry of the U.S. Senate's standing investigation committee, which also is launching an investigation into the role of American banks in the subprime mortgage crisis, according to reports.

So what’s wrong with the U.S. government doing some much-needed policing of Wall Street, especially since taxpayers bailed out the so-called “too big to fail” investment banks?

In theory, there isn’t anything wrong with a thorough review, but it’s just not that simple. The financial crisis that led to the Great Recession’s start in December 2007 is not a black-and-white issue. It’s fine shades of gray, with shared responsibility (blame) at all levels of society.

A review of recent headline stories from the Associated Press expands the blame game:

•Report: Health overhaul will increase nation's tab

•SEC staffers watched porn as economy crashed

•Democrats set showdown vote on Wall Street bill

While it’s reassuring to know politicians want to clamp down on Wall Street’s excesses – long after the damage has been done but continues to haunt us – it’s still disturbing to read about the SEC staffers (maybe the unemployed would like those jobs?) and health care reform (does anybody understand what this overhaul really will do for us?).

Why should we trust the U.S. government to get it right this time when it didn’t get a handle on things before and after the recession began? Aren’t Obama and his predecessor,
George W. Bush, opposite sides of the same coin – each spending money we don’t have and leaving the tab for generations not yet born?

Forget the party labels because these days they are almost meaningless. Most folks, especially those who built businesses from dust, just want results. Neither Bush nor Obama, at least so far, showed anything in the way of fiscal restraint.

As for Goldman Sachs, (some of my retirement funds are with GS), if the firm did what it’s accused of, then it should be penalized. But we also should have reservations if the government’s main purpose is making an example out of the investment bank in targeting financial abuse and excess.

Bottom line: There’s plenty of blame to be shared all around – from Wall Street to Main Street, and all points in between.

Many of us overused plastic, knowing full well we couldn’t pay the credit debt, never mind the interest. We also took out home equity loans, treating our price-inflated houses like cash cows, which allowed us to live well beyond our means. We partied, along with the pols and Wall Street, until the bubble burst in a sea of job losses, home foreclosures and crushed retirement plans.

Mark Britton, founder of lawyer ratings Web site avvo.com, said that if the Goldman Sachs fraud case went to a jury, the investment giant would try to persuade the panel that the firm was a political victim. Hate to admit it, but it sure looks that way.

If U.S. authorities want to speed up financial supervision reforms, do so across the board, skip the political posturing, and get back to fixing our ailing economy, so people can find decent-paying jobs again.

But let’s not use Goldman Sachs as the lightning rod for all that went wrong in the financial markets. Fairness would dictate an even-handed approach – new safeguards aimed at protecting American consumers regardless of who they do business with should be the ultimate goal, not another taxpayer-funded witch hunt.

The problem is some business and government leaders continue to do things the way they’ve always been done and, somehow, they expect different results. Anyone can tax and spend, and then find scapegoats when things turn sour.

We need creative solutions to critical problems, not more lip service, and definitely not more media talking heads slanting stories to suit their personal agendas. We need real leadership -- at all levels -- to restore trust in our institutions, the country and in ourselves.

As for me, I practice what I preach at writenowworks.com.