国际英语新闻：What's behind Goldman Sachs fraud case?

BEIJING, April 22 (Xinhua) -- A government lawsuit against Wall Street investment giant Goldman Sachs for alleged fraud has drawn widespread attention in the past week.

How the case will evolve? What changes it will bring to the overhaul of U.S. financial regulatory system? The questions remain unanswered at present and it's worthwhile to study the case comprehensively.

FIGHT FOR REPUTATION?

The U.S. Securities and Exchange Commission on Friday charged Goldman Sachs with "defrauding investors" over subprime mortgage securities, which were largely blamed for the worst financial crisis since the Great Depression.

The government agency, which is responsible for regulating the U.S. financial market, alleged that Goldman Sachs failed to disclose crucial information to investors who thus suffered a loss of some 1 billion U.S. dollars.

Some media reports say the SEC, which was earlier blamed for not discovering the Ponzi scheme of Bernard Madoff in a timely fashion, was determined to crack down on Goldman Sachs in a bid to defend its reputation and restore public confidence in the agency.

However, Goldman Sachs has denied the SEC allegations and also has vowed to fight for its reputation.

"The SEC's charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation," the investment bank said in a statement.

According to reports, Goldman Sachs chief executive Lloyd Blankfein is required to attend an April 27 inquiry of the U.S. Senate's standing investigation committee, which also is launching an investigation into the role of American banks in the subprime mortgage crisis.

U.S. lawyers believe that the case will be very complicated due to the complexity of the financial trading process, which is hard for a jury to understand and may affect their judgment.

Mark Britton, founder of lawyer ratings website AVVO.COM, said that if the case went to a jury Goldman Sachs would try to persuade the panel that the investment giant was a political victim.

Other analysts said Goldman Sachs may also seek reconciliation with the SEC because both sides haven't ruled out the possibility of alternative options.

Meanwhile, the fraud case has brought about a negative impact on Goldman Sachs.

The bank's stock slumped more than 13 percent after the fraud charges were announced.

Analysts said the investment giant also may lose a group of customers, particularly U.S. and European government clients.

The British Financial Services Authority, Britain's financial watchdog, said Tuesday it also has started an investigation into Goldman Sachs after the SEC charged the Wall Street giant.

German financial regulation authorities will also ask the U.S. to provide detailed information on the case, a German government spokesman said recently.

TOUGH TASK FOR FINANCIAL REGULATION

The alarm bell for financial regulation has been ringing for a while since the outbreak of the global crisis. However, the federal lawsuit involving the Wall Street heavyweight is still catching enough attention and is considered a stimulative for U.S. authorities to speed up financial supervision reforms.

The Senate will soon vote on a financial reform bill that the House of Representatives approved last December. The legislation, proposed by the Democrats, urges tougher rules on capital markets and banks.

On different occasions, U.S. President Barack Obama has reaffirmed his pledge for higher regulatory scrutiny.

During a meeting with his Economic Recovery Advisory Board last week, Obama said he would veto a financial regulation law if it does not bring the derivatives market under control.

Analysts see the Goldman Sachs case as an opportunity for Obama to make a stroke in fixing financial disorder. But they also question the timing.

Roger Freeman, an analyst with Barclays Bank, said the SEC lawsuit is "a well-timed, and perhaps not coincidental, effort to sway some on-the-fence Republicans" to be decisively tough just days before the Senate votes on the reform bill.

Some observers believe that it could be a "critical juncture" for the administration to gain popularity ahead of the mid-term elections.

However, the White House has denied the claim that the administration was behind the SEC move.

In the meantime, the case also put the other side of the Atlantic on alert for tightening regulations on sophisticated financial derivatives.

Michel Barnier, the European commissioner for Internal Market and Services, said the European Commission was determined to draw up regulations for financial derivatives if Goldman Sachs loses the SEC lawsuit.

The EC was expected to come up with a new financial supervision draft in June that demands higher regulation standards and more market transparency.

Meanwhile, the Committee of European Securities Regulators said the EU's member states will fully look into the Goldman Sachs case when it moves further along.