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By Lawrence Mitchell
Published: July 22 2010 23:05 | Last updated: July 22 2010 23:05
The Securities and Exchange Commission blew a perfect opportunity to redefine its role with its decision last week to accept a $550m settlement with Goldman Sachs over accusations that the bank misled various investors in a subprime mortgage product at the start of the US housing crash. In its founding legislation, Congress empowered the SEC both to protect investors and to ensure a fair and efficient market. The settlement may have accomplished the first goal. But it also showed the SEC's continuing failure to take its wider regulatory role in a more aggressive direction.
The settlement compensated the various investors for their losses, and mandated some remedial training for Goldman mortgage department employees. It also required greater internal monitoring at the bank. It caused Goldman some limited pain, in the light of its significant drop in second-quarter earnings earlier this week. Despite this, the SEC's decision continued a previous pattern of attempting to compromise with Wall Street, one fraud at a time, in times that call for more muscular regulation and clearer public signals.
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