Goldman Sachs has come to a settlement with the SEC: it will pay $300 million in fines, and another $250 million in restitution, according to the NYT. There’s no indication that any Goldman executives are being forced out: this is a purely financial settlement, and does not even include Goldman admitting any wrongdoing.
This is surely a massive win for Goldman, whose entire business was at stake if it was found guilty of serious wrongdoing. The company’s shares are soaring in after-market trade, and although they won’t approach their pre-case levels any time soon, Goldman can now begin to distance itself from Abacus noise, and try to put the whole sordid tale behind it.
In financial markets, memories are short, and the effects of this case and its settlement will fade away quite quickly. Clients will probably never trust Goldman as much as they did before the crisis, but that was true even before the SEC brought its case. And Goldman is putting a lot of effort into becoming much more transparent on the conflicts-and-ethics front:
A "business standards committee" is in the middle of an internal review that will examine everything from Goldman's management of conflicts of interest to product suitability for clients. A quarter of the firm's 400 partners will contribute to the report, which will be handed to a board committee in December. The findings will be made public.
This settlement is surely testament to the extraordinary powers of persuasion which still exist within Goldman Sachs, but some kind of settlement was always likely: the SEC didn’t want to risk bringing a complex case like this in front of an inherently-unpredictable jury. I’m just surprised that they didn’t even get any management changes, or any kind of mea culpa. The risk, of course, is that Goldman’s victory here will only serve to exacerbate its arrogance. Could the Squids of West Street become even more insufferable, now?
Is this as close as we will get to a mea culpa from you for your over-the-top, hysterical analysis when this case first broke? You pontificated with minimal understanding of the facts of the case and minimal comprehension of bespoke mortgage credit derivatives. Here’s a napkin for the egg on your face.
In ethics, money and trust, Goldman’s win is society’s loss. That much is now settled. By the hyena-like shrieking of their laughter shall ye know the way to the bank.
Looks like the SEC blinked! Note that this came one day after Obama met with Buffett.
Obama Meets With Buffett to Discuss Economy, Jobs http://www.washingtonpost.com/wp-dyn/con tent/article/2010/07/14/AR2010071405107. html
Coincidence? Not a chance. Goldman’s special dividend payments to Buffettt have proven to be the best investment of all time.
Apparently the meeting yesterday between Buffett and Obama was a very long meeting, and it was initiated by Buffett, not Obama.
This was always the most likely outcome. The SEC prefers to settle cases rather than litigate, especially against powerhouses such as GS. It conserves resources and allows the SEC to pursue additional cases with the time, money, and labor it would have expended on suing GS. Likewise, GS had enormous incentives to settle the case in order to draw a line under what was a serious PR disaster. And it is standard procedure in SEC settlements for the settling party not to admit wrongdoing – admission of guilt in such settlements is almost unheard of. I don’t see how anybody could have been surprised by this outcome.
While it’s true that this sort of settlement has historically been standard procedure (at least in recent times – I wonder if it was always thus?), here’s why we should be surprised: we just had a rather large financial crisis, one of whose prime beneficiaries appears to have been Goldman Sachs. How naive of me to think that perhaps the time for business as usual had passed. And Felix, if you actually think any jury empaneled in this country could have been persuaded to acquit Goldman Sachs of any charge short of serial murder you are living on a different planet. The SEC decides not to go forward because most of its employees ultimately want to work for Goldman or somebody else on Wall Street and an ugly trial would sully those prospects.
What slowlearner said.
It was an extremely weak case and a small, token (by GS standards) settlement seemed preordained. Consider the $550M as a political payoff or extortion money for the SEC to shut up and go pester someone else.
The more amusing part is that IKB is being rewarded $150M of the “restitution” for, well, managing to hire incompetents.
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