Judging the Bankers: The Financial Crisis and the Courts

July 15th, the day that the financial reform bill passed the Senate, will likely serve as a critical milestone in the campaign to create a new legal infrastructure for the financial industry, one that, hopefully, will serve as a bulwark against risky conduct and future financial crises. Much work remains to be done, however. What's more, financial reform legislation, the new regulations that need to be generated as a result of the law, and the creation of a Consumer Financial Protection Agency will do little to compensate for the losses caused by the present financial crisis. If those responsible for the financial crisis are to be held accountable, grassroots efforts, like the Move Your Money campaign, will be well served by complementary efforts launched in the courts. Along those lines, another important event occurred on July 15th, one that may serve as a key turning point in the campaign to hold banks accountable for their responsibility for bringing about the present crisis.

As the whole world now knows, last week, the Securities and Exchange Commission announced that it was settling its landmark securities fraud case against Goldman Sachs for some of the investment bank's shady securities practices. The practices challenged by the SEC included allegations that the investment bank created investment vehicles doomed to fail: vehicles that were created in large part for some clients to bet that they would fail, while still other clients were led to believe they would not. The settlement, for over $500 million, is one of the largest securities fraud settlements in history. While some may see it as a slap in the wrist for Goldman, the settlement may have profound repercussions across bank board rooms and litigation war rooms across the country. Many on Wall Street might hope that the Goldman settlement closes the book on accountability for the banking industry for its role in bringing about the financial crisis. While it may indeed be the beginning of the end for Wall Street accountability, it is more likely that this is, as Winston Churchill once said in the depths of World War II, only the end of the beginning.

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