THE US Justice Department announced earlier this month it was ending an investigation into allegations that Goldman Sachs committed securities ‘fraud’ in its underwriting and marketing of mortgage-backed securities in the months leading up to the Wall Street crash of September 2008.

The department said it would not file charges against the bank or any of its employees. The Obama administration’s Justice Department took the unusual step of making a public announcement that it had cleared the bank of wrongdoing.

The allegations stemmed from a detailed, 640-page report on the financial crisis issued in April of 2011 by the Senate Permanent Subcommittee on Investigations. The report, based on a two-year investigation and 56 million pages of evidence, documented omissions and commission of major banks and the complicity of credit rating firms and federal bank regulators.

While releasing the report, the chairman of the committee, Senator Carl Levin, said the panel’s two-year probe had uncovered ‘a snake pit rife with greed, conflicts of interest and wrongdoing.’

The largest section of the report by far, comprising 240 pages, was devoted to a scrupulously documented account—citing internal emails, memoranda, prospectuses and interviews—of how Goldman Sachs, beginning in December 2006, offloaded billions in toxic sub-prime mortgage holdings to investors by packaging them into complex mortgage-backed securities and collateralised debt obligations (CDOs). Goldman sold the investments while concealing the source of the mortgages, the fact that they were losing value, and Goldman’s belief that they would decline further.

The committee referred its findings to the Justice Department, suggesting that Goldman CEO Lloyd Blankfein, who testified before the panel in April 2010 and flatly denied taking a net ‘short’ position on mortgage-backed securities or amassing profits by defrauding clients, be prosecuted for perjury.

Last Thursday, the same day that the Justice Department gave Goldman a free pass, the bank reported that the Securities and Exchange Commission had concluded its own civil investigation into a $1.3 billion sub-prime mortgage deal dating from 2006 and decided to take no action.

These actions exemplify the operation of the aristocratic principle in what passes for American ‘justice’. They are not subject to the laws that apply to mere mortals. They are a law unto themselves.

Of course, to secure this status, the financial lords must devote a portion of their fortunes to keep on their side politicians, parties, regulators and courts etc. But this hardly has to be concealed any longer since it has been essentially sanctioned by the Supreme Court’s ruling on corporate donations for political campaigns.

The current crisis has revealed how completely the bankers rule behind the trappings of democracy. Instead of being held accountable for treating the world economy as their personal gambling casino, the financial oligarchs were rewarded with trillions stolen from the public purse.

On page 329, for example, the Senate report states: “The Goldman Sachs case history shows how one investment bank was able to profit from the collapse of the mortgage market, and ignored substantial conflicts of interest to profit at the expense of its clients in the sale of RMBS [residential mortgage-backed securities] and CDO securities.”

On page 376, its said “… Goldman engaged in securitisation practices that magnified risk in the market by selling high-risk, poor quality mortgage products to investors around the world.” The report concludes with a survey of federal securities laws that apply to Goldman’s activities. On page 606, the following appears: “With respect to a broker-dealer, the SEC has held: “When a securities dealer recommends a stock to a customer, it is not only obligated to avoid affirmative misstatements, but also must disclose material adverse facts to which it is aware. That includes disclosure of ‘adverse interests’ such as ‘economic self interest, that could have influenced its recommendation.”

The role of the government in shielding the financial aristocracy —not a single leading US banker has been prosecuted since the crash of 2008—shatters all claims that the financial system can be reformed. The grip of the financial aristocracy, the state and the society can only be loosened by a new democratic social force.—Courtesy WSWS