Cui Bono: The strange case of the US regulator SEC and investment bank, Goldman Sachs

The weekend saw a rather bizarre case reported in the US press of the Securities and Exchange Commission (SEC) decision to prosecute the investment bank Goldman Sachs and one of its traders in the case of practises around packaging 'toxic assets' (sub-prime mortgages) and the transparency around their sale to the public.

The case is bizarre at first glance as firstly, Goldman Sachs lost $90m themselves and second that much of the case is around the involvement of John Paulson, the man who a) advised the fund on the composition of assets and b) the man who benefitted principally by shorting the fund he advised Goldman to create and c) who earned a personal paycheck of $3.5bn is not at all implicated in the scenario.

The fact that there are no images of federal agents making arrests or offices being stormed for documents implies that the case is a spurious fishing exercise at one level. Additionally the it was reported that Goldman Sachs had known for 9 months of the pending SEC action.

However by Monday morning the political strategy underpinning the choice has become far clearer. The Obama push for financial reform in an environment of blossoming financial markets creates a need to remind the body politic of the evils of unbridled capitalism (from a Democrat perspective) defining the timing of the SEC card being played by the Obama Administration, leading to five key questions;

1. Will Goldman Sachs make a stand on principal that it acted ethically or will they fold and settle quickly and quietly ?

2. Where was the influence of the Goldman alumni network with the Obama administration ? Is the influence of the network on the wane ??

3. Can Goldman Sachs win the case on behalf of itself and Wall Street ?

4. What will this case do for Democrat fundraisers going into the mid-term elections and the US elections in 2012 ? One would suspect a Republican platform along the lines of "enough punishment - lets get back to making money" will garner far more political interest and campaign funds not only from Goldman though additionally from other institutions fatigued, and fearful of another four year punishment beating.

5. Who will ultimately be the political whipping-boy for the financial crisis ? Clearly Bernie Maddoff is not a big enough fish - although he did immense damage he was not hauled in chains to Washington. One could suggest that looking backwards to the likes of Michael Milken (as a superficial level) that the person seem most to benefit from a situation becomes the real political target for action.

Witness round 1 in a multi-stage campaign.