The coalition government should be held to account over comments made during the election campaign, calling for Goldman $achs to be barred from Government.
On April 16th the US Securities and Exchange Commission (SEC) charged Goldman Sachs with “defrauding investors” over subprime mortgage securities, and on April 20 the Financial Services Authority (FSA) decided to commence a formal enforcement investigation into Goldman Sachs International in relation to the SEC allegation.
Goldman Sachs allegedly failed to disclose to investors that it was betting against subprime mortgage investments it was selling to clients. Essentially, the accusation was that Goldman pushed a product designed to fail.
In response the Tories and Liberal Democrats said Goldman Sachs should be suspended from working for the Government until the outcome of a fraud case brought against the investment bank is known.
At the time, Nick Clegg, prior to the election, had said:
“We believeGoldman Sachs should now be suspended in its role as one of the advisers to the Government until these allegations are properly looked into.”
A point reiterated by Vince Cable, who said:
“The Government should not be paying for the services of a bank that is being investigated on both sides of the Atlantic. The allegations made against Goldman Sachs are extremely serious. Not a penny of taxpayers’ money should be paid while these allegations hang over [the bank].”
The Conservatives echoed the Liberal Democrats’ concern; Mark Hoban, then shadow Financial Secretary to the Treasury, said:
“If Gordon Brown believes Goldman Sachs are ‘morally bankrupt’, why is he still using them as advisers? He is lashing out at the people he was very happy to work with over the last 13 years as both Chancellor and Prime Minister.”
Once in government, however, the Tories and Lib Dems have failed to follow through on their rhetoric: on May 14 Goldman Sachs was hired to sell 40-year index-linked bonds on behalf of the government. Last October, Goldman was paid £3.5 million in commission for its role as a lead manager in a £7 billion gilt deal.
Yesterday it was reported that a proposed bank levy had been omitted from the Queen’s speech. These moves suggest a softening in approach to the big banks from the once vocally populist opposition parties. The coalition government should be held to account over comments made during the election campaign. When vast amounts of government spending is being cut we should ensure (in the words of Vince Cable) that:
“Not a penny of taxpayers’ money should be paid while these allegations hang over [the bank].”
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