Gillian Tett on Goldman Sachs

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FT.com / Columnists / GillianTett - Now is the time to inject some genuine transparency.

As Gillian Tett says in the FT:

The SEC thinks that Goldman did is rig a CDO deal in a way that allowed it (and its hedge fund clients) to make fat profits. This is the banking equivalent, if you like, of a used car salesman flogging a vehicle that the salesman knows to be very dodgy, to a customer that has little chance of getting independent information.

Of course they plead not guilty.

But as Gillian Tett says:

[I]in reality, it has long been an open secret that “free market” principles did not really apply to many parts of the CDO world during the credit boom. On the contrary, back in the last decade, when banks were pumping out CDOs, the sector was so murky that it was easy for banks and hedge funds to engage in shady practices that enabled them to make a fast buck.

And:

the most important lesson from Friday’s suit is that it shows exactly why the regulatory debate that is under way in Washington and Brussels matters so much. One reason why so much malfeasance flourished in the CDO world during the last decade was that it was not just lightly regulated, but also very opaque.

But so far this drive towards greater transparency has proceeded at an achingly, shamefully, slow pace. That is partly because of political infighting, but also because many of the banks continue to fight real change.

However, the good news about Friday’s suit is that it could now strengthen the pressure to inject real transparency into the financial world.

Some of us, of course, have been arguing for this for a long time.


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