As shocking as the fraud charges are against Goldman Sachs, bankers and others cautioned against enacting regulations to address a problem they didn't create.
Instead, if an influential investment banking firm is damaging the economy by committing fraud, bankers said Friday, it would be best to attack the fraud using existing regulations.
"A consumer protection agency is not the solution," said Douglas Manditch, chairman and chief executive of Islandia-based Empire National Bank, referring to President Barack Obama's proposal to create a new agency that would regulate financial firms.
Manditch said the charges of selling securities to some investors while betting with another investor that those same securities would fail show why investment banks should not benefit by having the risks they take be protected by taxpayers.
"At the very least, it's an ethical fraud," Manditch said.
Investors leave themselves open to fraud when they fail to do their own research, said Robert Goldberg, an adjunct finance professor at Adelphi University in Garden City.
"If investors did their homework on those mortgages [behind the Goldman Sachs securities], which they don't do, they would know it's a bad pool of mortgages," said Goldberg, a veteran of several Wall Street firms. "Instead, they just trust in Goldman."
Tom O'Brien, president and chief executive of State Bancorp Inc., based in Jericho, said he hoped medium-size banks like his wouldn't be affected by a regulatory reaction to things Goldman Sachs does.
"They're big. They're smart. They're aggressive," O'Brien said. "There's no one like them."
And that's why the entire regulatory system shouldn't be changed just because of them, he said.
"I don't want to be regulated because Goldman did something wrong or reckless or harsh," O'Brien said. "They made the money. Let them pay for it."
And Goldberg said the charges against Goldman Sachs are an indication the system does work.
"The regulations are there," he said.