The Goldman case reveals the complexity and incestuous nature of the relationship between Wall Street and the government. In this case, Goldman is accused of not telling its most sophisticated customers--two banks--of the risk inherent in purchasing certain mortgage backed securities and of not telling these banks that another of Goldman's clients was betting against the success of these instruments.

The entire case will revolve around whether this unreported information was "material." Stated differently, was this information that Goldman should have revealed or was it objectively apparent that the purchasing banks knew or ought to have known of it? As well, does a seller need to reveal that another of its clients believes that the item being sold is not worth its value?

Goldman lost $90 million on this deal and the SEC knows that; so what is the SEC accomplishing by seeking disgorgement of profits when there were none? It is establishing a political atmosphere in which it will be easier to enhance government regulations over the financial community. Is it proper for the government to time its litigation in order to enhance its legislative agenda?

Finally, Goldman says it was blind-sided by this lawsuit; and it was. The federal rules of civil procedure require that before suing anyone, a plaintiff must ask for whatever it wants in the suit and be turned down. The SEC never asked Goldman for a nickel from this matter before it sued them--and that is a basis for dismissing the lawsuit.