Goldman, Blankfein and the New Financial Regulatroy "Reform"

On Thursday, I wrote that the Goldman fraud case appeared to be political from beginning to end. This morning, in an editorial, it appears that WSJ has the same view:

The Securities and Exchange Commission's lawsuit against Goldman Sachs achieved perfect political closure this week. Filed on April 16, just as the Senate prepared to debate financial reform, the alleged fraud case was settled on Thursday, the same day 60 Senators approved the final draft of the Dodd-Frank bill.


Mission accomplished.

How does this jive with my view that Blankfein is has ruined his relationship with Obama (who has a long memory) because he dissed Obama by not flying into D.C. for a meeting?

It's important to keep in mind that Goldman and Blankfein are not one in the same. For starters, Goldman has a very important shaerholder, Warren Buffett, who visited the President the day before the Goldman settlement with the SEC. Goldman is important to the power elite. Blankfein is not and he likely is toast. Remember, Buffett has thrown heads of investment banks under the bus before. When he owned a chunk of Salomon Brothers, he not only forced John Guttfreund out, but blocked Guttfreund from getting a huge multi-million severance package.

Now, Charles Gasparino, who knows a thing, or two, about the mysterious ways of government enforcers, including the SEC, and their deal making, reports that Blankfein is probably on the way out:

Now that Goldman has indeed settled, the news is being spun, again mostly by the financial media, that the deal with the SEC was a victory for Goldman's CEO Lloyd Blankfein, who survived the investigation largely unscathed, paying a measly $550 million to the government (equivalent to a few days trading gains at Goldman) and without having to give up any power, such as relinquishing his role as chairman of the board, as senior executives both inside Goldman and at competing firms believed would be part of any settlement.


Well, if history is any guide, Blankfein may not go tomorrow, or even next month, but sometime in 2011, Blankfein will at the very least no longer be chairman of Goldman, and may also be forced out of the firm altogether.

If you don't believe me ask former Citigroup CEO Sandy Weill. Like Blankfein, Weill (at least on paper) was a good CEO from an operational standpoint...

[When] Citigroup.....was charged with fraud and ended up paying a $400 [million] fine to settle the matter, ...Weill appeared to have retained his control of the bank. The initial reaction in the press and among his peers in the financial business was that Weill had won, by having the bank pay a relatively small fine, and his status as CEO and the King of Wall Street secure.


Not quite. A few months later, Citigroup announced that Weill was stepping down as CEO, handing that job to Chuck Prince, who basically negotiated the settlement package. Citigroup maintained that the two moves were unrelated. But people in Spitzer's office told me they really weren't: While negotiating the settlement, Citigroup's board made it clear to investigators that Weill's days were numbered at the top of the firm that he founded. Spitzer was merely affording Weill a graceful exit in an effort to end the case.

In another words, it looks like everything is cozy in Obama's world. He satisfies the power elite by getting the SEC off of Goldman's back. He still nails Blankfein and he gets regulatory "reform" passed.

Oh yeah, as farm as that regulatory "reform", here's a backup view to mine on how the reform largely gives a license to regulators to do what they want, which is why who is named as head of the new Consumer Protection Bureau is so important. NYT writes:

Damon A. Silvers, an associate general counsel and policy director at the A.F.L.-C.I.O., said it was imperative that the bureau begin life under an effective and forceful leader, given that the legislation left so many decisions to regulators.


“It really is nothing more than a grant of power to do things, and what those things are going to be are largely in the hands of the agency,” he said.