On Friday, we received news that Wall Street icon Goldman Sachs had come under investigation by the Securities and Exchange Commission (SEC) for allegedly misleading its customers by withholding “vital information” about a synthetic collateralized debt obligation (CDO) named Abacus. The news rocked the market, but in the days following the Friday Goldman sell-off, stocks managed to recover.

I’ve read a lot of news stories and commentary on the Goldman affair and, frankly, I don’t really think anyone has a good sense of what actually took place. The SEC is convinced that Goldman misled customers, and Goldman insists it didn’t. I don’t know which side will come out victorious here, but one thing for certain is that the real loser likely will be you, the investor.

I say this because every time the government tries to curb market activity via new rules aimed to protect investors, a disincentive arises for banks and other firms to take risks. Now, I am not saying that securities laws proposed by regulators are all bad, far from it. But what I am saying is that many times, the proposed solutions to problems -- such as the Obama administration’s push for financial reform -- end up hurting those it’s ostensibly designed to protect.

I hope for all of our sakes that any reaction and/or regulations born out of the Goldman affair are measured and targeted. Sadly, I fear that the politicians in power will take a much more shotgun-like, punitive approach to the situation.