Goldman's long nightmare is over. In a settlement with the SEC, they've admitted to giving "misleading information" to investors in the notorious Abacus case, and have agreed to pay $550 million, some of which goes to compensate investors, some of which goes into the giant pit of money known as the federal government.
The Financial Times analyzes it this way:
Goldman won the day on Thursday by avoiding the word “fraud” and by being fined less than some people had expected, but the long-term toll remains profound.
Robert Khuzami, director of the SEC’s enforcement division said the settlement was “a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing.”
It's a "stark lesson" all right: mislead investors, and suffer the consequences of a fine roughly 3% of the previous year's bonus pool.
That'll show them.
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Jun '10
Re: Goldman Sachs Confesses, Pays Whopping* Fine! (* "Whopping" in this case, means about 3% of last year's bonus pool)
This is standard wheeling and dealing on Wall Street and in Washington. The fine suggests that the government didn't have a case, especially given that it's “roughly 3% of the previous year's bonus pool.” The other indicator is the speed with which the adversaries came to terms. So, it would not be remiss to suggest that Goldman wasn't in a position to spend a billion bucks to prove that the government position was weak. What we got here was a standard Obama shakedown a la Gulf Coast/BP and a career of community organizing. Anyone want to bet Obama gets appointed to the board at Goldman after he leaves the Oval office, which we all hope will happen at the earliest possible date.
Jul '10
Re: Goldman Sachs Confesses, Pays Whopping* Fine! (* "Whopping" in this case, means about 3% of last year's bonus pool)
I have to disagree that the SEC settlement is insignificant merely another example of Washington & Wall Street playing pat-a-cake. The amount may seem paltry, but the consequences of the settlement could be great. It strengthens the hand of Goldman Sachs clients looking to sue, so watch for civil suits. It blackens Goldman Sachs' reputation, so watch for them to lose existing clients and face difficulty in finding new clients. It will increase the difficulty face by Goldman Sachs in selling structured financial instruments because investors won't trust the company's statements concerning those instruments. It also sullies the reputation of Warren Buffett, who asserted that Goldman Sachs had done nothing wrong.