(CNSNews.com) – Less than 30 minutes after the Securities and Exchange Commission announced its lawsuit against Goldman Sachs, the Democratic National Committee sent mass e-mails proclaiming that the action shows the need for passage of financial reform legislation –- currently the top priority for President Obama.
A similar message -- the need for financial reform legislation -- was part of an online advertising campaign posted hours later by the DNC. Before the SEC even made the announcement about its lawsuit, the news was leaked to The New York Times.
Many Republicans have questioned the timing of the lawsuit against Goldman Sachs, and SEC Inspector General H. David Kotz has announced that his office will investigate whether SEC officials coordinated with political officials, something that would violate rules insulating the autonomous commission from political considerations.
The SEC’s ethics rules state that its officials must “reject any effort by representatives of the executive or legislative branches of the government to affect their independent determination of any matter being considered by the Commission.”
“We will seek review of documentary evidence, including e-mails between and among the individuals who may have participated in or been aware of the timing of the SEC action brought against Goldman,” Kotz said in a letter from Sunday, April 25 to Rep. Darrell Issa (R-Calif.), ranking member on the House Oversight and Government Reform Committee, who requested the probe.
“We will also seek to conduct interviews of all persons with potential knowledge of the facts and circumstances regarding this matter, including those outside of the SEC,” Kotz continued.
“While our jurisdiction to compel testimony only extends to current SEC employees and contractors, we hope to obtain cooperation from those outside of the SEC, including the individuals and offices that you reference in your April 20, 2010 letter to Chairman Schapiro, as necessary,” he added.
Issa sent a letter on April 20 to SEC Chairwoman Mary Schapiro seeking records of communications between SEC personnel and the Executive Office of the President, the DNC and The New York Times.
“The Goldman litigation – filed by the Commission on Friday April 16, 2010 – has been widely cited by Democrats in support of the financial regulatory legislation currently before the United States Senate,” Issa wrote.
“We are writing to request that you provide documents and information to this committee regarding any sort of prearrangement, coordination, direction from or advance notice provided by the commission to the administration or congressional Democrats regarding last Friday’s filing against Goldman,” Issa added.
Issa set an April 27 deadline for the SEC to respond to the information request.
The SEC civil action charges Goldman, Sachs and one of its vice presidents for defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages as the U.S. housing market was beginning to falter.
The Democratic financial reform bill includes the creation of a new consumer watchdog agency and would also allow the Federal Deposit Insurance Corporation (FDIC) to borrow federal taxpayer dollars to give a failed firm “working capital” to stay afloat while the government dismantles it.
Meanwhile, the legislation allows the government to guarantee any or all of a failed company’s debt, meaning that should a major financial institution go under and be seized by the government – the federal government would backstop any loans the company has to make to stay afloat, paying out all of the failed firm’s obligations the government deems necessary. (See Earlier Story)
Schapiro said in a statement one day after the Issa letter that there was no coordination.
“The SEC is an independent law enforcement agency. We do not coordinate our enforcement actions with the White House, Congress or political committees,” Schapiro said.
“We do not time our cases around political events or the legislative calendar. The fact is that regulatory reform has been pending for over a year. We have brought many cases related to the financial crisis over that period. On a personal level, I am disappointed by the rhetoric,” Schapiro added.
“In all my years as a Commissioner and Chair at the SEC and the CFTC — having been nominated to these posts by Presidents of both political parties dating back to Ronald Reagan — I cannot think of any instance where politics was a consideration in bringing an enforcement action,” she continued.
White House Press Secretary Robert Gibbs also asserted the SEC is an entirely independent agency.
“Obviously – I’m not going to get into discussing a regulatory action – or, I’m sorry, an action taken by an independent regulatory authority,” Gibbs told reporters on April 19. “The SEC doesn’t notify the White House of its enforcement actions and certainly didn’t do so in this case.”
Issa, in his letter to Schapiro, said the timing could be coincidental.
“The American people have a right to know whether the commission, or any of its officers or employees, have attempted to used their positions to help President Obama and congressional Democrats pursue their legislative agenda and seek victory in the 2010 congressional elections,” Issa wrote.
“If however, the appearance of coordination between commission’s Goldman suite and Democrats’ partisan activities is merely the result of coincidence and extraordinarily fast political reflexes, disclosure should offer the commission the best opportunity to address outstanding concerns,” he added.