SEC smells big prey

April 20 (Bloomberg) -- Robert Khuzami, shortly after becoming the Securities and Exchange Commission’s enforcement chief last year, told Congress the agency must be willing to fight big cases to show it poses a “credible threat.”
Targeting Goldman Sachs Group Inc., the most profitable company in Wall Street history, in the SEC’s first contested lawsuit against a major investment bank in more than a decade reflects the enforcement unit’s new combative approach.
The stakes for the SEC are high. While winning high-profile cases may help the agency restore its image after being battered by the financial crisis and its failure to detect frauds including Bernard Madoff’s Ponzi scheme, losing may tarnish the SEC’s reputation. Goldman Sachs said it will “vigorously” fight the case, which hinges on whether information withheld by the firm should’ve been disclosed to investors.
The lawsuit says: “We’re willing to file big cases, we’re willing to file against the biggest firms, and we’re willing to file about the most complicated stuff,” said Mark Radke, a former SEC official now at Dewey & LeBoeuf LLP in Washington.
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Comment: Too many entrepreneurs, unfortunately and hard to understand, and too many high executives, understandably but unfortunately as well, seek intimacy with the state, with governments and their functionaries. Some companies, such as Goldman Sachs, even think that they can get special protection through personal connection. This, however, will only pay-off when the connection allows the company, in this case GS, to make particularly profitable bets based on implicit guarantees of bailouts. All that has happened in the past. Yet politicians, in times of crisis, turn populist, and turn against those who have fed them in order to gain popular support. The intimate connection between politics and business is of great evil. In the end, it makes all of us lose. It may have some advantages in good times smoothing the running of the car, but it turn very negative once we're hit by a crisis. Instead of alleviating the effects of economic and financial crises, the connection between big business and state, modern (democratic) fascism, makes matters worse. Monopolisitc state capitalism is not a viable economic system.