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Quick (and, alas, non-substantive) word about the Goldman case

By Anonymous

I'm still not sure if I want to write a full post about the Goldman charges, because (a) I don't have the offering docs, and (b) it's pretty clear that people are going to believe whatever they want to believe, facts/law be damned. But reading over the SEC's complaint yesterday, I was stunned by how weak their case is. Unless the SEC is holding back an absolute smoking gun, which is unlikely, Goldman is going to knock this weak shit out of the park. As to the merits, again, I don't want to get into it without the offering docs, but let me just say one thing: everyone keeps saying that Paulson had "significant influence" over the composition of the portfolio, as if that phrase means something. It doesn't. (Disclosure: John Maynard Keynes had a significant influence on my thinking.)

The debate inside Goldman right now is over whether to settle quickly, or take it all the way to judgment. I'm betting they take it to judgment. They probably could've settled with the SEC already, given how long ago they received the Wells notice. My guess is that the SEC was demanding too high a settlement, and that Goldman balked, wagering that the SEC wouldn't bring such a ridiculously weak case. Whoops. If I were there, I'd tell them to just settle, but then again, I was always the one saying we should settle. (I'd have advised settling after the Wells notice came, if only to prevent that "Fabulous Fab" email from ever seeing the light of day. If that's not worth a billion dollars, then what is?)

My sense is that they're thinking, "You know what? The know-nothing talking heads can get all huffy if they want, but we're right, and they're wrong, and we've had just about enough of this shit. We're taking it all the way!" [Cue the rah-rah blast emails.] While I kind of sympathize with that view (emphasis on "kind of"), I also think it's incredibly short-sighted. Sure, having attention-hungry idiots constantly villify you in the media eventually gets to you, but it's still just words. This is the first time all that nonsense has turned concrete and hurt Goldman monetarily, not the culmination of some long series of events which has forced them to draw a line in the sand. So take a deep breath, and realize that this can either be a one-month story that you lose, or a two-year story that guarantees a steady stream of negative publicity and wears on morale, but that you win. Take the blue pill.

Full post as published by Economics of Contempt on April 18, 2010 (boomark / email).