“This is an issue the Commission has expressed interest in, inquired about and believes is of serious concern,” said Phil Angelides, chair of the Financial Crisis Inquiry Commission. “What the Commission sees as its central mission is whether practices like this were widespread in the marketplace or isolated incidents.” The allegations against Goldman go to the “very trustworthiness of the marketplace,” Angelides said.
“It’s significant to investigate because they go to the question of whether practices destabilized the marketplace,” he said, as opposed to what Wall Street firms and their federal overseers refer to the meltdown as a confluence of unanticipated events. “If you have a major market participant creating securities, then betting against them and not fully disclosing that to investors, that’s significant.”…
“But the kind of damage that was done was so severe and pervasive that the entire U.S. economy was damaged, so it’s extremely important that the SEC has filed a fraud suit.
“And by the way, this won’t be the end of it,” said Tavakoli…
“The SEC itself has shirked its responsibilities in these matters for years,” she said. Referring to the extensively-documented nexus between “failed mortgage lenders, predatory lending, massive mortgage fraud and the creation of these securities,” the SEC’s “hands have been forced by public voices,” Tavakoli said.
Oh, and one other thing is starting to become clear: synthetic C.D.O.’s made the crisis worse than it would otherwise have been.