Monday, April 19, 2010

Setting Up the Doddo Bill

The SEC's fraud lawsuit against Goldman Sachs is a civil case, i.e, it has the lowest burden of proof. The suit names the most hated firm in America and a hedge fund manager. They happen to be two major targets of Senator Dodd's "weak kneed bill.

Dodd made hay on the suit:

"Let there be no doubt, in my mind, our bill would have prevented that kind of events from happening, in my view, and that's what the public needs to know. By not enacting our legislation, by filibustering it, stopping it, we leave the American public vulnerable once again to the kind of shenanigans that have occurred in our large financial institutions across this country."

Horse hockey, the bill does not stop securitizations. Nor does it reign in many shadow bankers, private equity underwriters (PEU's) or sovereign wealth funds (SWF's).

Dodd offered to pull the $50 billion liquidation fund from the bill to "please Republicans." The move has a "public option" feel to it. Yank it and get no additional votes, which means the Blue team wanted it. I'm sure funders are pleased. Dodd received over $10 million in lifetime donations from the financial sector; securities & investment firms, insurance companies, and commercial banks.

Once again, nary a Doddly peep on PEU’s. Yet, The Carlyle Group has its own civil lawsuit. This didn't come from the SEC, but from investors. They believe Carlyle fraudulently sold stakes in Carlyle Capital Corporation, a "triple A rated" mortgage security fund levered 32 to 1. Other Carlyle actions warrant SEC investigation.

The SEC lawsuit was filed against Goldman Sachs on Friday. Democrats make political hay on Monday. President Obama will speak in New York on Thursday.

The Goldman suit reads like Rahm Emanuel/Jim Messina campaign magic. Practical politics needs a precipitating event, one that's choreographed for Q ratings.

Update: At least Canadians are willing to write about Dodd's free pass to PEU's.