White House Must Answer Questions About SEC's Goldman Sachs Suit

The White House must be open and transparent in making sure questions are answered in a timely fashion.

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By Peter Roff, Thomas Jefferson Street blog

The Obama White House has spent considerable time over the last two days pushing back against the impression it may have colluded with the U.S. Securities and Exchange Commission over the timing of a civil fraud lawsuit against Wall Street powerhouse Goldman Sachs.

The suit, which according to press reports has been in the works for more than a year, accuses the investment bank of deliberately misleading investors who participated in a mortgage securities trade that was designed to fail.

To the more cynical minded, the fact that the suit became public at the same time the White House is trying to push a financial regulations bill through Congress is somewhat suspicious. Likewise, as Greg Gordon of McClatchy Newspapers reported Thursday, eyebrows are up over the revelations that Goldman Sachs’ CEO Lloyd Blankfein had at least four meetings inside the White House at the same time lawyers for his firm and the SEC were in negotiations over the suit. Writes Gordon:

White House logs show that Chief Executive Lloyd Blankfein traveled to Washington for at least two events with President Barack Obama, whose 2008 presidential campaign received $994,795 in donations from Goldman's political action committee, its employees and their relatives. He also met twice with Obama's top economic adviser, Larry Summers.

Of course, no evidence has yet been produced to show that any of these meetings had an impact on the suit or the timing of its being made public. SEC Chairman Mary Schapiro denies her agency coordinates with the White House or other political bodies where enforcement actions are concerned but the absence of any smoking gun doesn’t necessarily let anyone off the hook.

True, it is difficult if not impossible to prove a negative, especially to the satisfaction of critics. But anyone who has ever worked in the executive branch knows that important news--and the fact that an SEC enforcement action is about to be brought against one of the biggest firms on Wall Street certainly qualifies--has a way of getting to the folks over at the White House who might have an interest in it. That doesn’t mean, necessarily, that anyone at the SEC told anyone at the White House anything directly; there are plenty of other ways that information moves around the nation’s capital.

Nevertheless the timing, the personnel potentially involved, and the amounts of money at stake mean that critics are right to raise questions. And the White House needs to be open and transparent in making sure they are answered in a timely fashion.