The Securities and Exchange Commission said last week it won’t sue Goldman Sachs over an awful subprime deal from 2006. The SEC now looks like it’s writing off any hope of scoring meaningful reprisals against the banks that brought down the American economy. In saying it won’t prosecute, the SEC is revealing the staggering weakness of the laws that are supposed to protect the economy, and the agency that’s supposed to be enforcing them.
Subprime mortgage bonds were rainmakers for Wall Street banks. Wall Street collected fees for supplying the cash that backed subprime loans, for packaging those loans into bonds, and for selling the bonds off to investors. So long as one wasn’t a homeowner stuck holding an exploding mortgage, or a bank with a balance sheet full of them, the subprime game was as lucrative as anything Wall Street had ever dreamed up. Which is why, as the wheels started to come off the subprime bus, big banks hit the gas.