Obama Admin Gives Goldman Sachs an (almost) Free Pass

Today Goldman Sachs settled with the SEC for $550 Million. That sounds like a lot of money until you think about the breadth of the market manipulation in which Goldman was engaged. Here's my take - What really went on here was an old-fashioned shakedown. After a few months of Obama making the most of his populist attack on Goldman, now Obama can stop attacking them, and they can get back to contributing to his campaign. After all, they are his #2 contributors. What a relief.

Goldman Sachs agrees to settle SEC fraud case for $550 million

The settlement in the highest profile fraud case stemming from the financial crisis gives both the investment bank and federal regulators a measure of what they need.

July 15, 2010|By Walter Hamilton, Tom Petruno and James Oliphant

Reporting from Los Angeles and Washington — The $550-million deal between Goldman Sachs Group and federal regulators to settle the highest profile fraud case stemming from the financial crisis gave each side a measure of what it desperately needed.

The government finally had an answer for critics who say Washington has been too soft on Wall Street. And Goldman Sachs could get on with making money, paying a fine that it can easily afford.

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Thursday's settlement with the Securities and Exchange Commission came as Congress passed the most significant financial reform in decades — legislation designed to prevent the type of abuses Goldman was accused of. With the law, President Obama declared a new era of oversight for the financial industry.

Goldman agreed to pay $550 million to resolve allegations that the company misled investors who bought subprime mortgage-related securities created by Goldman. Although Goldman neither admitted nor denied wrongdoing, it made a rare concession that its marketing materials for the securities had been "incomplete," which it acknowledged was a "mistake."

"It is a major victory for the SEC because you don't find other settlements in which the defendant admits it made materially misleading disclosure," said John Coffee, a Columbia University securities-law professor. "This is one where they really bet the farm on this case by taking on the most esteemed firm on Wall Street, and they obtained a concession by Goldman that they misled their clients."

Still, the penalty equals 4% of Goldman's $13.4-billion profit last year. Moreover, investors concluded the settlement was worth much more to Goldman than it would pay.

The deal sent the investment bank's stock price up nearly 10% in a surge that began on rumors late in Wall Street's regular trading session Thursday and continued in the after-hours market after the settlement was announced. The combined increase added more than $6 billion to the firm's total stock market value.

In a statement, Goldman called the settlement "the right outcome for our firm, our shareholders and our clients."

The company also sought to assure investors that it wasn't facing a cascade of SEC cases related to other mortgage-securities deals the bank sold during the heyday of the housing boom.

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