Why The SEC Split Really Doesn't Matter.

WaPo's Zachary Goldfarb looks into the SEC's split decision on whether to go after Goldman Sachs for fraud, with Democrats saying yes and Republicans saying no. Their reasoning was very suspect:

The Republican commissioners expressed skepticism that Goldman committed fraud because the investors were large companies, ACA Financial Guaranty Corp. and German bank IKB, saying both should have known about the risks involved in betting on the housing market. In a way, [SEC commissioners Kathleen] Casey and [Troy] Paredes were endorsing what's known as the "big boys" legal concept: that sophisticated firms should be allowed much more rein to engage in complex financial transactions and receive less protection from securities law.

[SEC Chair Mary] Schapiro and the Democratic commissioners, however, argued that Goldman should not escape accountability simply because its clients were big firms. They said the evidence showed that Goldman did not give clients crucial information about the investment that likely would have made them think again about placing a bet.

Personally, I would like to live in a world where we have one legal system, not one for the kiddies and one for the big boys. Is this an actual legal doctrine? You'd think you'd want to prosecute schemes involving sophisticated firms even more than one that ripped off a consumer. If even the most advanced firms are being taken for a ride, we should wonder what Goldman must be doing to regular folks.

While the commissioners are allowed their objection, I'm not sure this split undermines the case the way some commenters have been suggesting.

-- Tim Fernholz

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