Goldman and Sachs Exemplify Deregulation

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Last week, banking powerhouse Goldman and Sachs was charged with fraud by the United States government. The bank was accused of selling faulty mortgage investments to customers and pocketing millions of dollars based on deception. Some of you might have read that last sentence, and decided to stop reading the article—financial analysis and problems on Wall Street may not concern you. What most certainly should concern you, however, is the mistreatment of individual Americans and the tendency of large banks and companies to abandon all integrity with the hope of increasing their bottom line. Even more importantly, the United States government is finally creating a way for you, the individual, to combat corruption.

What Goldman and Sachs essentially did was analyze the housing market, targeting families that were likely to not be able to pay their mortgage. Then, it sold investments in these mortgages to individual companies, claiming that the investments were safe. Goldman and Sachs was aware, of course, that these investments were not safe. In fact, they were almost sure to fail. Within the financial market, Goldman and Sachs placed bets against their own investors (the companies who bought the mortgage investments), and systematically profited every time individual families defaulted on their mortgage. Regardless of the intricate explanations big banks and corporations may give and the complex wording they may use, the reality is that the financial crisis that has left so many hardworking individuals destitute is heavily influenced by big business executives looking to further their fortune.

For the eight years that George W. Bush was president, the United States government made a hefty effort to remove regulation of Wall Street. Elected officials like Tom Delay, appointed officials like Karl Rove, and powerful conservatives like Alan Greenspan (former chair of the Federal Reserve) worked tirelessly to create opportunities for big businesses to increase profits and to remove any ethical requirements that might hinder business growth. Delay’s involvement in fraudulent schemes against Native American tribes eventually led to his political demise, but many other political figures have been successful in their deceitful endeavors. The Bush Administration created something called the Commodity Futures Modernization Act just days into Bush’s presidency. With the passing of this bill, financial institutions were allowed to sell risky mortgage investments as securities to oblivious customers, as well as participate in unrestrained trading of derivatives (which are bets on financial pay offs, traded in secret by banks and lenders). The bill removed the government’s power to regulate unlawful behavior by financial institutions and created a breeding ground for banks like Goldman and Sachs to exploit the American people. Thanks, George, we really appreciate it.

The good news, however, is that change is brewing. President Barack Obama has vowed to create a regulatory overhaul, removing much of the deregulatory privileges elite businesses received from the Bush Administration. Many conservative members of the House and Senate are mobilizing against the overhaul, claiming it gives the government too much power. In light of past incrimination (see Tom Delay), I can’t help but wonder how many of those conservatives oppose the bill simply to protect their own investments in illegal and fraudulent scams. The fact is that our system of unrestrained capitalism is corrupt and nonfunctional. Something must be done to keep big business from continued toppling of our economic system. In the coming months, the formation of Obama’s plan to increase regulation should be a necessary staple in every USF student’s news diet.

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