Last week, the Securities and Exchange Commission charged that Goldman Sachs defrauded investors by failing to disclose conflicts of interest in subprime mortgage investments it sold as the housing market collapsed in 2007. Fabrice Tourre, a Goldman Vice President, is accused of encouraging investments into subprime mortgage securities he knew would fail, while working with a hedge fund to bet against its success. Referring to himself as the “the fabulous Fab,” Tourre boasted in e-mails about his scheme to defraud investors.
Reacting to the SEC’s probe into Goldman, UK Prime Minister Gordon Brown over the weekend called for his own investigation of the firm. “This is probably one of the worst cases that we have seen,” Brown said. The Royal Bank of Scotland, a bank buoyed by a UK taxpayer funded bailout during the financial crisis, was one of the biggest victims of the alleged fraud, losing $841 million dollars. Earlier today, Britian’s Financial Services Authority announced that it will in fact start a formal enforcement investigation into the London unit of Goldman Sachs — where Tourre is currently employed.
The financial industry is fighting back. On Monday, the UK division of legal and lobbying giant DLA Piper released a poll of business leaders showing that an overwhelming majority (60%) want a Tory leader to take over when elections take place on May 6. 36% of respondents specifically expressed hope for the conservative leader David Cameron to become the next Prime Minister. The poll, which is being promoted in the British press, is accompanied by a message from DLA Piper UK’s London Managing Partner Catherine Usher calling for more free market reforms and an end to the Labour “regime”:
It will come as no surprise that our companies view tax as an area for major reform, with the current regime viewed as discouraging business activity in the UK and putting us at a disadvantage to other jurisdictions. [...] The alarm bells from businesses over the issue of red tape and employment legislation have grown louder over the past few years.
What DLA Piper UK does not disclose in its poll, and what the British media is largely ignoring, is that DLA Piper UK counts Goldman Sachs, as well as many other banks and investment firms, as clients. Like their American counterparts in the Republican Party, the Tories have been quietly courting the financial industry through a new organization called the Conservatives’ City Circle. At the same time, Tories are trying to present themselves as supportive of responsible banking reform and taxation. As Left Foot Forward, a progressive UK blog, has detailed, the Tories have raised close to £200,000 from financial firms as the election approaches. The Tories’ duplicitous campaign unraveled for a moment last month when Tory MEP Nirj Deva railed against an international bank tax on grounds that it would “give money to a whole bunch of people who will probably steal it.”
While President Obama mounts his effort to impose a responsibility fee and new financial regulations, Republicans have met with top bankers to trade campaign contributions for a promise to fight change. As ThinkProgress first reported, Wall Street lavished Scott Brown (R-MA) with contributions and support front political attack groups for his special election to the US Senate. Recently, Sen. Mitch McConnell (R-KY) met with hedge fund managers before announcing his opposition to financial reform. Brown, along with his GOP colleagues, have mirrored the Tories and defended banks from a responsibility tax, while simultaneously telling the public that they support reform.