As you know, the Securities and Exchange Commission (SEC) filed securities fraud charges against Goldman Sachs alleging that the company “…caused investor losses of more than $1bn….” The tale goes like this…

Goldman Sachs had a client, Paulson & Co., which wanted to bet against assets linked to sub-prime mortgages. So the question was, how could one create a product designed to fail? More importantly, who could you find to buy such a product?

The unfortunate bank which took the bet was IKB, described by The Economist as “…a German state bank with a seemingly inexhaustible capacity for self harm1.” Paulon & Co. ended up pocketing around $1bn from the wager, while IKB lost $150m. An insurance firm, ACA, lost a further $900m and went out of business. For these services, Goldman earned a $15m fee.

But what’s more shocking, is the National Public Radio report2 about the SEC stating that “…senior agency staffers spent hours surfing pornographic websites on government-issued computers while they were supposed to be policing the nation’s financial system… A senior attorney at the SEC’s Washington headquarters spent up to eight hours a day looking at and downloading pornography.” While largely ineffective against corporate greed, the SEC attorneys are at least masters of their domain.

This brings to mind a scene from Joseph Conrad’s The Heart of Darkness. During his cruise down the west coast of Africa, Marlow comes upon a French man-of-war which is indiscriminately firing it’s guns into the dense jungle. Shot after shot drops into foliage without a leaf stirring. The enemies, Marlow reports, were “…hidden out of sight somewhere.”

In the empty immensity of the earth, sky, and water, there she was, incomprehensible, firing into a continent…There was a touch of insanity in the proceeding, a sense of lugubrious drollery in the sight.

The Financial Times observed that Goldman Sachs chief executive Lloyd Blankfein once said that “Goldman Sachs did God’s work.”3 Of course, it was Enron’s Kenneth Lay who also said ” I did nothing criminal, and I also believe my God will get me through this.” And God obliged him.4

1. Greedy until proven guilty, April, 24, 2010.

2. GOP Ramps Up Attacks On SEC Over Porn Surfing, April 23, 2010.

3. SEC takes off the gloves on Goldman, April 17, 2010.

4. See earlier J’accuse…Lehman Brothers.