Bailout

Goldman?s win

By Felix Salmon

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?

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