- The Washington Times - Thursday, April 22, 2010

ANALYSIS/OPINION:

The man who takes “Sachs of gold” is the man who makes the rules. President Obama is that man, and Republicans in Congress should demand an independent special prosecutor to investigate the relationship between gold and rule-making in the executive branch. With nearly a million dollars of Goldman Sachs’ money in his hip pocket (rendering that institution his most generous 2008 campaign contributor) Mr. Obama appears to be ignoring some serious rule-breaking.

On Friday, news broke that the Securities and Exchange Commission (SEC) was suing the Wall Street bank of Goldman Sachs. Conspicuously absent was a corresponding announcement from the Justice Department that indictments were soon to be handed down. Curious, and also a major departure from the norm.

Mr. Obama has relentlessly attacked “big business” and Wall Street “greed” and, in the process, has exhausted every available metaphor from the leftists’ lexicon used to bash, undermine and delegitimize capitalism. Well, according to one report, the SEC is accusing Goldman Sachs of some pretty nasty stuff.

“The suit asserts that Goldman defrauded investors when it sold them a subprime-mortgage investment in 2007 that was secretly designed to lose value,” the report says. “The agency alleges that Goldman created and marketed the investment without telling its clients that Paulson & Co., a prominent hedge fund, had helped the bank assemble the investment while at the same time … placing bets that it would lose value. The bank received $15 million from Paulson & Co. for its services.”

What a compelling test case this could prove for a devout (when the proverbial pews are full) populist like Mr. Obama; Goldman could serve as the stump-speech whipping boy at every rally, especially now, as the administration seeks to “rein in” Wall Street. But Mr. Obama has made it clear that he wants no part of a criminal investigation that targets his most snuggly bedfellow of the 2008 election. And “Sachs of gold” are not the only cause of this hesitance. Treasury Secretary Timothy F. Geithner, one of the most influential and powerful members of Mr. Obama’s Cabinet, is notoriously close to many top Goldman officials. In fact, before his confirmation, Mr. Geithner’s critics were vocal about his many perceived conflicts of interest.

In January 2009, financial risk analyst Christopher Whalen gave voice to many of those critics when he told Yahoo Finance, “Geithner is the wrong man for the job because of his decision-making as president of the New York Fed. I believe Tim Geithner only represents part of Wall Street - Goldman Sachs.”

Indeed, Mr. Geithner was one of the primary architects of the Troubled Asset Relief Program (TARP). During the closed-door, never-to-be-revealed machinations that spawned that unprecedented taxpayer gift to a select few, Mr. Geithner engaged in an unusual number of contacts with Robert Rubin, the former co-chairman of Goldman Sachs. It also was Mr. Geithner’s decision to bail out American Insurance Group (AIG), a controversial move that rendered Goldman whole at a time when other banks were left struggling or allowed to fail, Bear Stearns and Lehman Brothers being the two most famous examples.

Mr. Obama faces potential peril if the SEC lawsuit naturally matures into a criminal prosecution, but he remains ever confident that he has little to fear from his less-than-independent attorney general. And so, he displays his usual hubris by politicizing the affair to his own benefit, using it to declare that this is why Congress should pass his Wall Street reform bill. This is the bill, according to sources, that would permit him to take over any public company that he deems unstable. Ah, “free markets,” indeed!

Mr. Obama is using the Goldman Sachs case to set a trap for Republicans, hoping Republicans will revert to form and do what they always do and are, in fact, already doing: defend Goldman. His bet is that it will distract from the real narrative, that Goldman is a consistent, heavyweight contributor to the Democrats in general and to his own political fortunes in particular.

Republicans can defend capitalism and repel another big government takeover and still champion justice by demanding that a special prosecutor discover the truth that lies at the bottom of this deal the SEC calls fraud. In doing so, Republicans should take it a step further, demanding that the investigation include political donations and influence-peddling. This is critical, considering the amount of taxpayer money used to bail out these politically connected firms.

The political fallout for Mr. Obama here could be devastating; after publicly chastising our country’s Supreme Court for a decision he claims will allow “big business” to exert undue influence over elections, he would be forced to defend himself for taking nearly $1 million from a huge banking institution that faces probable indictment. All the while, Republicans could take the high road and lecture Democrats about the evils of big banks, Wall Street and tainted campaign donations. What a novel turn of events that would be.

Scott Wheeler is a former investigative journalist and director of the National Republican Trust PAC. Buckley Carlson is a Washington-based political strategist.

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