On April 16 the US government accused Goldman Sachs, Wall Street's most powerful firm, of fraud, saying Goldman had sold mortgage-backed securities without telling buyers that the securities were put together with input from a client who was betting they would fall in value.

The Securities Exchange Commission (SEC) charged Goldman and one of its vice presidents with failing to disclose key information to investors. Goldman's stock fell, and the rest of the market followed suit.

The fraud is a severe blow to the US economic recovery and will dent investor confidence.

This is not the first time Goldman has been involved in a scandal. In 2001 Goldman arranged currency swaps to allow Greece to massage its debt figures to meet the European monetary union's rules on deficit limits. At the time, there was no requirement to report such transactions and this essentially enabled Greece to borrow funds while concealing the real size of its debt.

Goldman reportedly made millions of dollars in fees, and there are allegations that it entered into subsequent deals with other parties that allowed it to profit from the fall in Greece's credit rating.

Timing

But the timing of the SEC announcement on Goldman is highly suspect. The news was released the same week President Obama began a major push for financial reform. It seems the US government had made up its mind to take action against financial firms like Goldman, but the SEC denies it had any contact with the administration regarding the timing of the news release.

Goldman's role in the Greece crisis has angered some European countries. They view Goldman's behavior as an attempt to undermine European integration.

Meanwhile, the US government is hoping to rebuild investor confidence and fix its relationship with Europe by investigating Wall Street fraud.

The author is a columnist with China.org.cn. For more information please visit:

http://www.shenbo75.com/opinion/node_7077605.htm

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