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The Financial Crisis as Crime Story

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The case has not even been heard in court and the company denies all the allegations. Almost every business publication has carried commentaries by insiders who say the government may have a hard time prevailing, and dismissing all the Sturm and Drang.

And yet the public seems to be delighted if not outraged by the SEC's charges against Goldman Sachs, the opulent investment bank that many Americans see as the poster child of those causing the financial crisis. Even in the world of business where dislike of government crackdowns is dominant, a new poll shows that a majority believe Goldman is getting what it deserves.

Argyle Executive Forum conducted the survey electronically among its senior corporate leadership community.

The precise wording of the survey question was:

As Goldman Sachs Group is currently at the center of a legal maelstrom triggered by the SEC's fraud charge last week, we want to ask you how you currently feel about the charges. Please select one of the below:

  • I feel the firm is innocent
  • I feel the firm is guilty
  • I am currently unsure

The result:

  • 55.2 percent of business leaders feel Goldman Sachs is guilty
  • 20.7 percent of business leaders feel Goldman Sachs is innocent, and
  • 24.1 percent of business leaders are currently unsure

An earlier poll of the citizenry found that 82 percent in our highly polarized country wanted a "crackdown" on Wall Street. A public that seems to oppose bailouts has a different attitude towards a jailout.

Writing on Greanville Post, Patrick O'Connor and Barry Grey argue that Goldman's actions are criminal even though the SEC brought only a civil complaint against what seemed to be an arcane practice, alleging a failure to disclose key information. They write:

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"The public marketing and secret short-selling of junk assets was a common practice carried out by virtually every major Wall Street firm. It was part of a colossal fraud perpetrated on the American people. The banks lured people into taking out mortgages they knew the purchasers could not afford. They then packaged these toxic loans into securities-collateralised debt obligations-and made billions in profits by selling them to investors around the world, including pension funds, 401(k) plans, insurance companies and private investors. Those involved knew very well they were running the equivalent of a giant Ponzi scheme-a fraud far more massive and destructive than the criminal operation headed by Bernard Madoff."

Madoff's sins preceded the meltdown by years diverting attention from how Wall Street itself had become a far more sophisticated crime scene, not of lone con men but of institutions that had successfully lobbied to loosen laws and regulations and build an industry on a bedrock of fraud and deception.

This environment was promoted through the expenditure of hundreds of millions of dollars for lobbying legislators and campaign contributions. There was extensive collusion between the financial services industry and politicians of both parties.

Cutbacks in government monitoring of financial practices became the norm, with fines and "settlements" in (with some exceptions) replacing vigilant oversight and the prosecution of wrongdoers at the federal and state level. Fraudsters were primarily punished with fines businesses paid as a cost of doing business.

These practices, aided and abetted by cutbacks in the budgets of agencies that monitored and enforced laws, meant that an open season on homeowners and investors had been declared. In 2004, the FBI warned of an epidemic of mortgage fraud, but also acknowledged their own white-collar crime squads had been downsized when fighting "the war on terror" became the priority.

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As conservatives dominated politics, laws were softened and courts soon looked the other way as a historically unprecedented transfer of wealth got underway. What were once considered criminal practices were now redefined as legitimate ways of doing business. Observers like Denis Arvay commented in The Atlantic:

"This was criminal in any serious definition of criminality, but all perfectly legal in the lawyer-crafted vermin-nourishment clauses under which our economy was looted.... The way that the banking industry recently gutted foreclosure-protection indicates the thieves are still running the show, with the help of a thoroughly corrupted government."

This deeper story was also not as media accessible because it revolves around an unsexy finance-industrial labyrinth-of savvy computer-tethered mathematicians ("quants") and financial magicians devising complex and hard to understand structured and bundled financial vehicles: derivatives, CDs, CDOs, credit default swaps and tranches etc.

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News Dissector Danny Schechter is blogger in chief at Mediachannel.Org He is the author of PLUNDER: Investigating Our Economic Calamity (Cosimo Books) available at See

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Our time - Al Capone puts Eliot Ness behind bars a... by Marika on Tuesday, Apr 27, 2010 at 11:44:44 AM
you'll have to forgive me but just from the second... by katherine magdangal on Tuesday, Apr 27, 2010 at 12:34:31 PM
Yep directly and indirectly about 100 billion of t... by Miriam Callaghan on Tuesday, Apr 27, 2010 at 4:21:09 PM
Because of Group Of Pigs reptiles that .......... ... by James Roop on Tuesday, Apr 27, 2010 at 4:50:38 PM
Also note Katherine that the questioning is more a... by Michael Shaw on Tuesday, Apr 27, 2010 at 9:34:15 PM
"The brightest and most honest economic researcher... by The Pen vs The Sword on Tuesday, Apr 27, 2010 at 1:02:01 PM
Adamson suggests a solution too, and I think it's ... by Guy Dwyer on Tuesday, Apr 27, 2010 at 3:09:46 PM
This is a perfect example of Democratic and Republ... by Jeffrey Rock on Tuesday, Apr 27, 2010 at 4:39:40 PM
The government is a .......... P-U-P-P-P-E-T ........ by James Roop on Tuesday, Apr 27, 2010 at 5:06:57 PM
A well reasoned response.... by Miriam Callaghan on Tuesday, Apr 27, 2010 at 5:21:52 PM
Clinton signed in the repeal of Glass Stegall that... by Perry Logan on Wednesday, Apr 28, 2010 at 4:55:30 PM
Why is this a civil rather than a criminal hearing... by Michael Shaw on Tuesday, Apr 27, 2010 at 9:13:35 PM
Corruption won't stop until the cost is too high. ... by boomerang on Tuesday, Apr 27, 2010 at 9:23:43 PM
- it all certainly is a crime, a crime which has b... by siamdave on Wednesday, Apr 28, 2010 at 3:58:17 AM
If someone robs and trashes a convenience store, t... by Ralph Tanner on Wednesday, Apr 28, 2010 at 8:52:32 AM
Ralph, I'd like to give your comment 300 million "... by boomerang on Wednesday, Apr 28, 2010 at 11:22:43 AM
My thoughts/comments on this as a post to today's ... by Alan MacDonald on Wednesday, Apr 28, 2010 at 5:30:18 PM
Great article. You left out drug money laundering ... by Dr Stuart Jeanne Bramhall on Saturday, May 1, 2010 at 6:21:20 PM