Rajat Gupta and Goldman Sachs: SEC After Big Fish?

By Matt Taibbi | March 3, 2011

I've been accepting a lot of calls about the contempo decision by the SEC to accompany cabal trading accuse adjoin Rajat Gupta, a Goldman Sachs lath affiliate who was aswell the above arch of McKinsey, one of the a lot of important accumulated consulting firms in the world.

It's been actual absorbing to watch the media acknowledgment to this case. The spin, overwhelmingly, has been that this is affidavit that the SEC is added austere than ever. Business Week came out with an commodity whose headline blared, "The SEC Goes Afterwards Big Game." CNBC's take was "Rajat Gupta: Bigger than Madoff?" I'm abiding by the time this account aeon ends, Rajat Gupta will be the individual a lot of important amount in the history of Wall Street.

There's no agnosticism that Gupta is a big angle and this is a acceptable case. The affirmation is arresting and is eerily agnate to the non-case that was non-made adjoin Morgan Stanley administrator John Mack years ago. In that case, a hedgie alleged Art Samberg bought the hell out of a aggregation alleged Heller Basic anon afterwards a alarm from Mack, who had just had a affair with CSFB, Heller's investment banker, which was in a position to apperceive that Heller was about the bought by GE.

In this case, Gupta, a part of added things, telephoned his associate Raj Rajaratnam beneath than one minute -- actually -- afterwards acquirements in a Goldman lath affair that Goldman was about to accept a $5 billion basic bang from Warren Buffet's Berkshire-Hathaway aggregation in 2008. In September 2008, Gupta broken from a Lath appointment call, in which he abstruse about the Buffet deal, at 3:56 p.m. By 3:57, he was on the phone with Rajaratnam, who in about-face waited beneath than a minute to buy 175,000 added shares in Goldman.

It's abundant that the SEC is affective adjoin a amount like Gupta. But I'll be a little aghast if he's the top of the aliment alternation here. If the Gupta/Hathaway case is the alone one they accomplish with attention to the aggressive cabal trading that went on during that analytical bailout period, it will not be enough, unfortunately. How abounding of the admiral and admiral complex with the assorted rescues and bailouts fabricated investment decisions based aloft advice they got during those negotiations?

My faculty of what happened in 2008-2009 -- and abounding of the Wall Street humans I allocution to consistently say the aforementioned affair -- is that all the big banks were trading massively on central advice about bailouts, absorption amount changes, and announcements about government programs like the PPIP and the TALF. In a way, the accomplished rearranging of the abridgement abaft bankrupt doors -- the backroom deals in which companies like Merrill and AIG and Bear and Washington Mutual and so on were conjugal to buyers in taxpayer-aided shotgun weddings -- this was all one behemothic cabal trade. Clearly there were individuals who knew about these deals and acted on them afore the blow of the world's investors did. If you attending at it like that, one abandoned Rajat Gupta isn't traveling to cut it, I don't think.

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