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Goldman Sachs SEC case: Is it all about politics?

The Goldman Sachs SEC case, filed Friday, comes as President Obama makes a push for Wall Street reform in Congress.

By Staff writer / April 20, 2010

SEC Chair Mary Schapiro, Fed Chairman Ben Bernanke, and Treasury Secretary Timothy Geithner testify before the House Financial Services Committee Tuesday in Washington. The Goldman Sachs SEC case comes just as Obama seeks Wall Street reform in Congress.

Charles Dharapak/AP

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Republican lawmakers on Tuesday raised concerns that the lawsuit in the Goldman Sachs SEC case, filed on Friday, may be more about politics than securities law.

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Whether or not that assertion is true, what's undeniable is that regulators have alleged fraud at Goldman just as President Obama is making what he hopes will be a final push to win passage of Wall Street reforms by Congress.

What's more, the Securities and Exchange Commission (SEC) filed the case only after a 3-to-2 partisan vote, with Republican commission members opposing the action.

“The events of the past five days have fueled legitimate suspicion on the part of the American people that the Commission has attempted to assist the White House, the Democratic Party, and Congressional Democrats by timing the suit to coincide with the Senate’s consideration of financial regulatory legislation,” Rep. Darrell Issa of California wrote in a letter Tuesday to SEC chairman Mary Schapiro.

Even as Republicans sought to raise doubts about the SEC, however, Goldman itself faced new pressure Tuesday. Britain's Financial Services Authority (FSA) said it has launched its own investigation into Goldman Sachs International, after Prime Minister Gordon Brown lamented Goldman's "moral bankruptcy" in a weekend interview.

Mr. Issa, writing for himself and other Republicans on the House Oversight and Government Reform Committee, said Americans “have a right to know whether the Commission ... may have violated federal law by using the resources of an independent regulatory agency to promote a partisan political agenda.” He called for the SEC to release various records related to the case within a week.

Whatever the SEC's motivation, the sparring on Capitol Hill is a reminder that the stakes in the lawsuit are in many ways political. The impact on the debate over financial reform is the most obvious example.

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