Goldman Sachs has faced intense scrutiny for its alleged involvement in the types of dodgy mortgage deals that led to the 2008 financial crisis. But after an extensive investigation that went on for more than a year, the Justice Department has announced that it won't prosecute Goldman Sachs or its employees for alleged wrongdoing.
The Securities and Exchange Commission has also ended its investigation of the bank without taking any action. Benjamin Protess is a business reporter for The New York Times. William Cohan is a former investment banker and author of “Money and Power: How Goldman Sachs Came to Rule the World."
The Justice Department probe had been looking into allegation that the bank had been selling customers toxic assets while assuring the buyers that nothing was amiss.
"It comes down to [the question of] did they knowingly have intent to mislead investors, and ultimately after months of investigation, they just couldn't prove the case," Protess says.
"There has no been a successful prosecution of anyone from Wall Street," Cohan says. "Their track record is dismal, to say the least." Although the bank's behavior has been questioned and criticized, the burden of proof falls on federal authorities.
"As far as Goldman Sachs is concerned, Senator Levin is right," he says, referring to Senator Carl Levin's remarks in a 2011 subcommittee meeting during which he decried the bank's actions as "a real ethical issue."
"It may be unethical, it may be immoral, but it's not illegal. You make not like the way the laws are written, you may not like the fact that Goldman Sachs can short the mortgage market at the same time as it's selling these mortgage securities at 100 cents on the dollar to investors around the world, but unfortunately that is not illegal," Cohan says.
According to Cohan, Goldman Sachs is "way too smart" to let any sort of allegations be found against it. "They know exactly where the lines are, they know exactly how close they can get to the line," Cohan says. "They help write these laws and regulations, so it's no surprise that they know where they are." In his eyes, the $550 million that Goldman paid in SEC penalties in 2010 was just a way for the bank to avert more serious action.
Time is running out to make any sort of charges stick, but the SEC is stubbornly hanging on to a number of civil suits. "Even as we see Goldman start to [breathe easier], you do have the other big banks that continue to face scrutiny," Protess says. "Ultimately, there are going to be no big, big criminal cases to come from this crisis, [but] you do have some civil cases potentially still coming."