As someone who works for the so-called “corporate cronies” (i.e. the banks on Wall Street), I get to see capitalism at its best and the damage (and cost) that the government can do when it gets involved in the private sector.

The financial regulatory bill floating around Capitol Hill is a disaster and it’s targeted toward the wrong crowd.  Wall Street did not steal our money or cause the economy to crash.  It was a combination of the government pushing Fannie Mae and Freddie Mac to loosen mortgage loan standards, Fannie and Freddie loosening those standards and individual consumers who bought houses they couldn’t they afford.  The bubble burst and it caused the economy to come crashing down… just like every other bubble burst that we’ve had.  Remember the tech bubble burst of 2001?  Luckily we had a President in power who had already decreased taxes and acted quickly to stimulate the economy, rather than focusing on other issues like health care, the environment and apologizing for America.

Goldman has been slapped with fraud charges, but no one knows what information the SEC has now that they didn’t have a year ago or even 3 years ago.  Sure, Goldman made some bad bets, but since when is that illegal?  Some investors made some bad bets, but don’t we all at one time or another?  Again, not illegal.  Keep in mind that the people trading credit default swaps and mortgage backed securities were the big and girls.  The majority of people that traded these securities made hundreds of thousands, if not millions, managing portfolios.  Each of the securities have a prospectus, which describes the goals and general composition of the investment product.  They knew what they were doing so no one should feel sorry for them.  For those that didn’t know what they were doing, you shouldn’t feel sorry for them either because understanding your investement is Rule #1.

The SEC was saying that Goldman was pushing to sell the credit default swaps while short selling.  That’s the only place that I could see where they might get in trouble.  However, the market can change on a dime so it’s possible that they pushed the product in the morning and began short selling by lunch.  That shouldn’t be a shocker to anyone in the industry.

Here’s the bottom line.  If you want someone to blame, look to your neighbor with that for sale sign in their yard, look to Fannie and Freddie (who aren’t even included in the financial regulatory bill) and look to the politicians like Barney Frank and Chris Dodd who pushed Fannie and Freddie into easing loan standards, but don’t look to Wall Street.  They may be the easy target, but they are not the culprits.

If you’d like to do a little extra reading about capitalism, please read an article that John Stossel wrote last week regarding the myths of capitalism.  Click here for more.

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