Tuesday, April 20, 2010

Elizabeth Nowicki's Misunderstanding Re: Goldman and Abacus

Elizabeth Nowicki, a guest on CNBC this morning, was described as a "former SEC lawyer" and current member of a college law faculty.

If she epitomizes the way the SEC views financial markets, then we're in serious trouble.

While participating in a spirited debate with other guests and on-air staff, including a former federal prosecutor, Nowicki displayed a shocking lack of understanding of the current Goldman/ACA/Paulson affair.

Specifically, Nowicki declared that Goldman's behavior in this matter is identical to that of Wall Street analysts, such as Mary Meeker and Henry Blodgett, during the dot com bubble of the late 1990s. Nowicki contended that, just like those analysts, giving public opinions directly to retail investors which may have belied their private views, Goldman similarly duped public retail investors.

That's not even remotely close to what happened. Even if you believe Goldman behaved unethically, it was, at no time, trying to influence retail investors to buy securities which it had underwritten after ACA constructed the securities.

If Nowicki can't distinguish between retail brokerage analysts speaking out of both sides of their mouths, one being to retail investors, and the process of underwriting of complex securities for sale to sophisticated, institutional investors, then it's a good thing she's no longer on the SEC staff.

Question is, are there more like Nowicki, similarly unaware of these differences, still on that staff? And perhaps involved in bringing the Goldman suit?

A suit, by the way, which we've now learned was cleared for prosecution by the narrowest of margins, 3-2. Probably along political party lines.

Nowicki's views tend to reinforce my belief that it's rare to find A-team players among government agencies.

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