The U.S. Congress passed a historic financial reform bill yesterday, imposing more than 500 new regulations on everything from how credit rating agencies work to lending practices.
The bill gives the Securities and Exchange Commission power to approve or reject derivatives that are traded on Wall Street, which some have argued contributed to the financial crisis. The bill even creates a new council to oversee the financial stability of this country, and the council is imbued with the power to break up businesses that might otherwise bring down our economy.
So, why is it that we can’t help but feel a bit disappointed by the bill?
We have no doubt that the financial overhaul package will benefit consumers in the long run, if for no other reason than the creation of Consumer Protection Agency which will act as a watchdog for consumers when dealing with financial institutions and will have the power to author new regulations as needed. But part of the reason that this bill feels unsatisfying to us may be the fact that the companies we’ve come to think of as the culprits of the financial crisis seem, for the moment at least, mostly unscathed.
The same day that the bill passed, Goldman Sachs agreed to pay $550 million to settle a fraud case with the SEC alleging that they had knowingly misled investors into buying investments that Goldman knew were bad. This case had bubbled up into the public eye earlier in the year, only to recede when oil started to leak onto our shores and BP became public enemy #1.
Now, obviously, $550 million is nothing to sneeze at… unless of course you’re Goldman. The company earned $13.39 billion last year, which works out to be $36.7 million a day, according to U.S. News and World Report, which means they could pay off the fraud settlement in less than 15 days. Or much less in our crazy market, because the company’s value actually grew by $5 billion between Wednesday and mid-day today, undoubtedly because investors recognized that Goldman was getting out of the woods soon.
As Tonku Varadarajan wrote in the Daily Beast, “We can see the suit now, clearly, for what it truly was: a smokescreen to smooth the passage of the populist, and deeply flawed, Dodd-Frank bill.” He added that now, “Goldman has, effectively, bought its reputation back.”