Bailout

Goldman agrees to carry on as usual

By Felix Salmon

My favorite part of the SEC settlement with Goldman Sachs is the bit where Goldman agrees to “a permanent injunction from violations of Section 17(a) of the Securities Act of 1933″. Well, that’s reassuring, knowing that from now on Goldman has promised not to break the law. Goldman has also consented to an agreement that when it puts together new mortgage securities, it’ll run any prospectuses or term sheets by its legal or compliance departments. As if it wasn’t doing that already. And there’s lots more like that: people on the mortgage desk have to attend training seminars on disclosure! Goldman “shall provide for appropriate record keeping”! And so on and so forth.

Meanwhile, the closest thing to an admission of wrongdoing coming from Goldman is this:

It was a mistake for the Goldman marketing materials to state that the reference portfolio was “selected by” ACA Management LLC without disclosing the role of Paulson & Co. Inc in the portfolio selection process and that Paulson’s economic interests were adverse to CDO investors. Goldman regrets that the marketing materials did not contain that disclosure.

This doesn’t even rise to the level of an apology: it’s just a “regret”. Meanwhile, Goldman will be more than happy to wire $150 million to IKB and $100 million to RBS, as detailed in the proposed judgment. (Technically the judgment is contingent on being approved by the New York judge, but that’s just a formality.) As a way of getting out from under this suit, it would be cheap at twice the price.

The only bit of possible embarrassment still left for Goldman is the litigation against Fabrice Tourre, which is ongoing. I find that peculiar, since Tourre was pretty junior, and the people responsible for him behaving correctly all seem to be home safe. I’m not sure what the SEC thinks it might achieve with continued litigation against Tourre, or whether Goldman now feels that it can safely hang the poor chap out to dry. But this story has always been about Goldman’s actions, not Tourre’s. And it would be unfair, to say the least, if Tourre bore the brunt of the punishment, while Goldman gets away with little more than writing a check which barely makes a dent in its vast cash pile.

Full post as published by Macroprudential on July 15, 2010 (boomark / email).