How Goldman Sachs Can Wreck Your Forex Account

The publicity battle over financial reform in the United States gets ever hotter. A variety of glossy magazines are currently sinking their teeth into Goldman Sachs following the news that the investment bank is under attack by regulators on both sides of the Atlantic.  Although its articles are sprinkled with the word "alleged", Time seems to have already judged Goldman Sachs and the rest of Wall Street guilty as charged. In one article this weekend Time highlights the irony that Gary Gensler, a former Goldman Sachs partner and now chairman of the CFTC,  is currently gunning for his previous paymasters. According to Time:

His tiny and obscure agency is slated to get vast new regulatory authority over big banks. Since September Gensler has given more than 40 speeches about these complex contracts that allow banks, investors and corporations to bet on future events, explaining the central role they played in the financial crisis.

Time also suggest that:

Derivatives regulation — once a technical Washington backwater — has moved to the center of  Democratic efforts to curb Wall Street's worst financial excesses….. The banks have rallied a vast army of lobbyists to water down the legislation as it passes through Congress.

In another article on the same subject Time argue that:

The biggest bummer to arise from the allegations that the revered and feared Wall Street puppet master Goldman Sachs had played us all for patsies is this: the dial on the Wall Street capital-formation machine, the engine that was supposed to be the driving force of the greatest economic system on earth, was purposely set to junk — worthless, synthetic junk.

Beyond any legal issues, the Goldman case has become the battering ram for financial-reform legislation that congressional Democrats have been looking for. Democrats say it underscores the need to reregulate an industry gone wild. Republicans retort that the reforms on the table would have done little to stop the Goldman trade.

Over here in Europe The Economist is slightly more circumspect. They judge Goldman Sachs to be "greedy until proven guilty", and question the political timing of the announcement of the investigations:

Some question the SEC’s timing. The decision to attack Wall Street’s bogeyman-in-chief just as the White House makes a big push to get its financial-reform bill through the Senate is certainly striking. It raises “serious questions about the commission’s independence and impartiality,” said Darrell Issa, the top Republican on the House Oversight Committee.

Whatever the motive, the charges will increase pressure on Republican senators, already wary of being cast as Wall Street’s buddies, to compromise. For many Americans, clamping down on banks is almost as big a concern as jobs, [according to] a Democratic senator. Democratic leaders are hoping to bring the bill to the Senate floor within days.

Back in Washington Senators are battling it out across the aisle as well. Democrat Chris Dodd, chairman of the Senate Banking Committee, has written an open letter to Senate Republicans accusing them of being:

More interested in mischaracterizing the legislation and protecting Wall Street. As Nobel Prize winning economist Paul Krugman noted recently, ‘It’s a truly shameless performance…pretending to stand up for taxpayers against Wall Street while in fact doing just the opposite.’ Krugman went on to observe that Senate Republican leaders have held meetings with Wall Street lobbyists in an effort to coordinate their political strategy.

You may be wondering by now what all this has to do with your forex trading account, so I'll try to explain. When all the mudslinging has stopped, when all the new laws have eventually been enacted, and long before all the court cases have finally been decided, you may well wake up one morning to discover that your forex social networking site has disappeared and your trading account is suddenly limited to 10 to 1 leverage.