"Goldman Sachs what were you thinking.....getting caught?"

Financial reform seems to be the new buzzword around the D.C. beltway and the renewed focus of the President's domestic agenda. Pushing this to the forefront of the media is news just being released that Goldman Sachs, the financial juggernaut survivor of the massacre on Wall St., has been caught misleading investors. As an MBA student the financial reforms being proposed by the President have me at a real crossroad; on one hand I understand that the U.S., heck why should I limit it to just the U.S., the entire world financial industry is filled with corrupt self-serving individuals, and on the other hand as an individual investor who was severely impacted by the financial chicanery surrounding the collapse of the housing market.... wait, that's all on one side of the argument.

The other side is: although I am slightly bitter about my house price, I do feel that additional regulatory legislation and a new government agency will do little to mitigate the issues affecting the financial industry. When I see the signs of the financial disaster retrospectively laid out before me by industry experts .... I think to myself, "Wow how could I have missed it." With all the evidence and analysis publicly available and with the SEC starting to clamp down... wait. Sorry. That was my dream sequence. We don't need more government to supervise and police the industry, we need the government agencies that are currently in a position to regulate and effect change to stop being political puppets and start enforcing their rules and wielding their power to influence change.

Obviously something needs to be done to ensure the market doesn't allow banks and trading firms to hide information, mislead investors and focus on short-term investments , while foregoing long-term strategies. Smart legislation and a real push to buffer the SEC from political influence and ensure their impartiality is what we need. I’d like to see strong, sound, financial markets founded on basic economic principles and monitored by independent regulatory bodies. This is especially important with the continuing migration of individual retirement strategies from traditional employer funded pensions to 401k financial market based retirement accounts. There were plenty of opportunities for the SEC and Congress to investigate the run-up to the financial collapse, but no one when to be the one to pull the stop on the money ride. This of course would run contrary to those vociferous advocates of unrestricted, unsupervised business and financial markets, why? Because of course the markets are self-regulating, the markets would never do anything to harmful to impact their ability to grow. Well a lot of the old business rules possessed a very small footnote nobody paid attention to: the market will regulate itself and remain in balance if ran transparently (all financial information publicly available to investors), and the information is true. i.e. if companies are legit and nobody tries to cheat to get ahead, far ahead, by lying or fudging the rules, do this and the the entire market grows. Well at what point did all these financial geniuses (Milton Friedman), consider the fact that many people (like children), will take advantage and manipulate the rules and guidelines to provide themselves an unknown and some would say unfair advantage that provides only a short-term benefit with a long-term risk.



Why do businesses like Goldman do it? Besides the obvious financial benefit the simpler answer is because their ego let's them believe they're smarter than everyone else, they won't get caught (and if they do the penalties will still not overwrite the immediate benefits), and if does fall down around them they can say "it wasn't my fault", "everyone was doing it", and my favorite "if you don't bail me out from my ridiculous predicament the impact to everyone else will be severe", yes when all else fails blackmail wins. Goldman Sachs will probably come through with a minor slap on the wrist. Why you ask? Within hours after the announcement of the indictment the Dow Jones lost 125 points. Can't have that happen... my portfolio alone was hit to the tune of several K, darn it maybe the markets are self regulating because I definitely don't won't to lose more money - let them go SEC ... for the love of my pension, let my Goldman Sachs go free.