While we wait to see whether or not this week's confrontation between the Senate and Goldman Sachs will lead to any substantive and useful reform of current financial practices, we can follow the case of whether or not Goldman Sachs can be called to task over laws that are already in place. If last week's pornography scandal was intended to undermine the efforts of the Securities and Exchange Commission (SEC) to determine legal grounds for prosecution of abusive practices, then it seems to have failed at its goal. To put the icing on the cake, the target of this specific prosecution will be Goldman Sachs, specifically over those practices investigated by the Senate this week. Actually, as Al Jazeera English reported this morning, the SEC filed civil fraud charges against Goldman Sachs two weeks ago; but as of yesterday the Department of Justice has begun a formal investigation based on the SEC charges. In other words Justice is blind enough to avoid being distracted to titillating sideshows!
Thus far Goldman Sachs has reacted with a willingness to make its case in court. If this happens, then it may be the first time in which a legal decision will involve resolving differences between two constructed realities. From the Goldman Sachs point of view, there were no abusive practices; there were only normative business practices consistent with the constructed reality of Planet Wall Street. If the Senate could not understand this, then the problem had more to do with the cognitive impediments of Senators than with questions of either legality or higher values of right and wrong. However, when the case moves from a Senate Hearing Room to a courtroom, values are no longer the issue. The only real question will be whether or not those normative practices are consistent with the constraints of laws currently on the books. Thus everything will begin with whether or not the Justice Department investigation determines if there is a case involving one or more laws being broken. If there is little overlap between the respective worldviews of Planet Wall Street and Planet Washington, there is at least agreement that Planet Wall Street must honor those laws that are currently in place.
I suppose this may lend support to the Republican position that opposes further reform legislation. They can argue that the laws in place are sufficient, and they just need to be properly enforced. However, this overlooks the arms race metaphor of regulation. All laws have loopholes, and it is a good bet that Goldman Sachs pays good money to lawyers to seek out those loopholes. In other words the creation of new regulations leads to new business practices to get around those regulations; and, with the endorsement of corporate lawyers, those new practices become normative. This leads to new needs for regulation, and the cycle continues. It is nothing more than the coevolutionary process that maintains ecological balance operating in a business setting!