Last Friday’s news of the SEC charging Goldman Sachs with fraud wasn’t received well by the market, and that shouldn’t come as a surprise. The SEC has a problem with how Goldman Sachs continued to market their commercial debt obligations to the public while profiting from selling those products short. Goldman Sachs has indicated it won’t be giving up without a fight, because it believes the firm did nothing wrong. The first thought of all the traders on Wall Street was, who could be next? There were plenty of other players in the subprime market and the SEC could well crack down on other institutions.

Uncertainty is never a good thing for the stock market in the short and intermediate terms. I think it is very likely that as more news comes out about this case, the market will worry and stocks could suffer short-term downturns. The short-term aside, I do think the SEC taking this strong stance against a corporation like Goldman could be great for the stock market in the long run.

Why would this help the market? There has been a disconnect between Main Street and Wall Street for quite some time now, and many average citizens perceive the stock market as a shady place. This obviously isn’t good for the market, or the overall economy. Goldman Sachs is the biggest name in the investment banking industry that put our economy into a lot of trouble with the subprime market. I could certainly see this working out as investors gaining confidence in the system as whole since it seems much more likely now that no one company would be above getting punished by the government. Trust in the market is a huge key, and I think a tougher stance being taken by the SEC could lead to a much improved environment over the long haul.