Capital Markets

Issa Questions SEC's Market Timing

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Securities and Exchange Commission's inspector general David Kotz will wind down from revealing government employee porn preferences with an investigation of whether the financial watchdog timed its fraud suit against Goldman Sachs to help the proposed overhaul of financial regulation.

Darrell Issa is not afraid to show his emotions.

The investigation comes in response to a request from Rep. Darrell Issa (R-California), the man who would be governor of the golden state if not for this country's blatant anti-Lebanese bias.

From Issa's letter [pdf] to Kotz:

The circumstances of the filing and subsequent events fueled suspicion that the Commission, or one or more of its officials or employees, may have engaged in unauthorized disclosure or discussion of Commission proceedings in order to affect the debate over financial regulatory legislation currently pending before the United States Senate.

Issa, lachrymose ranking member of the House Oversight Committee, and seven other Republicans want to know whether the SEC leaked news of the suit to The New York Times, whether it coordinated with President Obama's Organizing for America group and/or the Democratic National Committee, and why the SEC's vote to proceed with the suit split along party lines. If the SEC was looking to time its investigation according to the legislative schedule, that would help explain why it went forward with what looks like a weaker case than the circumstances warrant.

For lefties not versed in the ways of the world, Republicans are standing up for Goldman because they support laissez faire capitalism and unfettered free markets. Inconveniently for that thesis, Goldman has given more than twice as much money to Democrats as to Republicans in this election cycle.

Issa's accusations, which turn on such feeble evidence as a DNC Google ad buy "within hours" of the SEC's announcement, don't look terribly strong. More to the point, this kind of corrupt use of the SEC could just be an example of things working the way they're designed to work. While political timing would go against the "spirit of independence" guidelines in the Code of Federal Regulations, the SEC belongs to the executive branch, and the president's cronies have broad discretion to deploy it as they see fit. If you want to change that, change the structure of financial regulation. Or better yet, get rid of the SEC, a New Deal creation that is as useless in dealing with the financial markets of the 21st century as it was in dealing with the financial markets of the New Deal era.