Did Financial-Reform Politics Influence the SEC's Goldman Case?

Did financial-reform politics play a role in pushing the Securities and Exchange Commission to file its risky lawsuit against Goldman Sachs? An investigation by the SEC's inspector general hopes to find out.How much did politics influence the Securities and Exchange Commission in its lawsuit against Goldman Sachs (GS)? It sounds like we'll find out, thanks to Rep. Darrell Issa, R-Calif.

Suspicious of the timing of the suit, coming as it did during the financial-reform legislation debate, Issa asked the SEC inspector general, H. David Kotz, to investigate. Now, after the Goldman settlement was announced on the same day that Congress passed the financial reform bill, Issa has asked Kotz to broaden the investigation to include the timing of the settlement. The inspector general agreed to expand his investigation Thursday.

While I look forward to reading the Inspector's ultimate report, I find it hard to believe that the SEC filed the suit solely to advance financial-reform legislation. After all, it was a high-risk suit for the SEC. Similarly, I'd wager that timing of the settlement was dictated more by the timing of Goldman's second-quarter earnings announcement than it was by the progress of the financial-reform bill.

Given the politicization that occurred under the Bush Administration, however, I'm not completely confident that politics played no role, and I won't be unless -- or until -- Kotz's report comes out and says so.

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