The SEC suit against Goldman Sachs may be the tip of the iceberg. According to Michael Lewis, author of the best selling, The Big Short, on the Wall Street financial collapse, "We are in for six months of revelations that are going to astonish people about what happened during the subprime boom and bust."
In an interview with CBS News anchor Katie Couric, Lewis said that Goldman Sachs isn't likely to be the only firm under scrutiny by the SEC. "What the SEC alleges Goldman did is something an awful lot of people were doing."
The bond market, which has been a kind of unregulated Wild West of sub-prime mortgage bundles and other exotic financial instruments, now has the belated attention of the SEC.
"Other Wall Street firms will implicated and other deals at Goldman Sachs deals will come to light," Lewis said. "The SEC essentially launched what amounts to a culture war."
"It's crazy for Wall Street firms to make bets for their own books on the stocks and bonds they are advising customer to buy and sell," Lewis said.
John Paulson, the hedge fund manager who allegedly picked the investments that are the subject of the SEC's civil fraud case against Goldman Sachs, likely did similar business with other banking firms, Lewis said.
And, bond traders, not company vice-president Fabrice Tourre who was named in the indictment, were the ones who called the shots. "He would have been trivial in the grand scheme of things," Lewis said.
Lewis believes that Wall Street can't control itself and needs "wholesale change."
"People on Wall Street essentially had incentives to design bonds that would go bad...incentives to disguise risk, incentives to misallocate capital, and incentives to underwrite loans that would never be paid. The incentive systems need to change," he concluded.