Goldman Might Settle All SEC Probes With One Lump Sum

To avoid a costly and extended legal process and staunch further image degradation, Goldman Sachs is talking to the SEC about tying up their big probe and all their little probes in a little bow.

Goldman would really just like to make one giant payment and just settle the whole darn thing and get back to its core business of making money appear out of thin air and then vanish in much the same fashion.

Goldman Starts Talks With SEC About Settling All Probes With One Massive Payment [Business Insider]

Comments

Edit Your Comment

  1. Loias supports harsher punishments against corporations says:

    I wish courts wouldn’t settle cases so much.

    Convictions make precedent, which makes future cases a lot easier.

    • tsukiotoshi says:

      Yeah but they are time consuming and cost the tax payer money. If most cases weren’t settled the legal system would come to a screeching halt.

      • Loias supports harsher punishments against corporations says:

        They cost tax payers more money up front, and less as precedent is established.

        It’s like renting something frequently without buying it. Each rental costs less than the purchase, but you would have saved more money buying in the first place.

      • Polish Engineer says:

        Something tells me the money required to actually take these guys to court instead of settling would have been cheaper than the TARP and Economic Stimulus bills that fell out of their shady activity.

        Failing to prosecute people because there is just too much illegal stuff going on makes about zero sense.

        • sonneillon says:

          The problem is they didn’t violate any prison worthy offenses. They followed the letter and loophole that the law provides. The only thing that the SEC can really do is fine them for questionable practices. And so in spite of them being assholes (which isn’t a crime) the government can spend tens of millions of dollars per person tried in court and they may get their pound of flesh or they may get acquitted, or the SEC can tell them how much the settlement is going to cost them.

    • rage says:

      hang draw and quarter the bastards.

    • craptastico says:

      if this went to court, there would be no convictions. whether you like what Goldman did or not, it wasn’t criminal. for one client of an investment bank to bet contrary to another is how investing is done. any security with a buyer must have a seller

  2. areaman says:

    I wonder if they are going to offer up a shitty deal to the SEC as well.

  3. Polish Engineer says:

    I don’t understand why companies are allowed to settle in SEC cases. Betting against your investors and wiping out a goodly portion of the economy isn’t like running a red light, and I don’t think they should be able to just plead no contest. Are these civil or criminal lawsuits?

    If a company comes to me and says, “I’ll give you a bunch of money to just stop digging around in my business”, I would take that as a massive red flag indicating there is way more to find.

    • Peer to Peer Nachos says:

      Exactly. If a cop pulls me over for speeding and wants to look in my trunk I don’t get the option of offering him a bag full of cash. For that matter, if I DO offer him cash I get charged for it!

      • Commenter24 says:

        The 4th Amendment (generally) keeps the cop from looking in your trunk if you’re pulled over for speeding.

        • peebozi says:

          the 4th amendment doesn’t keep the cop from looking in your trunk. that’s like saying a DUI conviction prevents me from driving a car. the 4th amendment allows you to argue the unconstitutionality of the cop looking in your trunk (without your consent) before a court of law with an attorney. :-)

  4. peebozi says:

    “We participated in things that were clearly wrong and have reason to regret,” said Goldman Sachs’ Lloyd Blankfein. “We apologize.”

    this is great news…the free market working at its most efficient.

    hopefully, goldman won’t succumb to morals or ethics and they will refuse to admit any illegal, immoral, unethical, fiduciary irresponsibility or any other wrong doing.

    The SEC must require clarification on the above statement!

    And please keep in mind that goldman contimues to average just about $100,000,000 profit EVERY DAY!!!!

    a 5 Billion dollar fine will take golman 2 months to pay off and also represent a tine fraction of the Hundreds of Billions they stole (and continue to steal via interest free loans used to buy guaranteed 2% treasury bills that the US taxpayer compensated them for purchasing) from America.

    Hang them all :)

    • Gaz says:

      Yeah it’s the free markets fault that people think the SEC is protecting them when in reality it is as poor at its job as any other regulatory agency. Big, bloated, inefficient and ineffective companies will die as soon as consumers take the responsibility to understand the companies they are involved with instead of counting on government bureaucrats to figure it out and warn them.

    • Gaz says:

      Yeah it’s the free markets fault that people think the SEC is protecting them when in reality it is as poor at its job as any other regulatory agency. Big, bloated, inefficient and ineffective companies will die as soon as consumers take the responsibility to understand the companies they are involved with instead of counting on government bureaucrats to figure it out and warn them.

      • Polish Engineer says:

        I’m not sure how a consumer is supposed to protect himself when his mortgage with his local bank is sold to a larger bank, bundled with subprimes, purchased by his 401k mutual fund, bet against by Goldman, and subsequently kills the value of his home and retirement. No amount of consumer savvy would keep those things from happening. GS was betting against everyone in the market, not only those it had a business relationship with. So assuming you did diligent research and knew GS was a evil monster, you still were not able to avoid the fall out.

        Suggesting to simply avoid bad companies is like saying people don’t need cops, they just need to pick a nice neighborhood. Things happen.

        I’m not saying the government is particularly effective, but it is attempting to fill a roll that is impossible for the consumer to regulate.

        • Gaz says:

          One of the primary reasons that mortgage was sold and re-sold was because there was a consumer at the end of that line (and several stages in the middle) investing in products based on that mortgages value. Consumers weren’t paying attention to their investments. How many people do you know even today after the collapse that can even name all the stocks they own? How can they possibly be responsible consumers if they have no idea who they’ve handed their money to?

          BTW, for the original home buyer with the mortgage, as long as he took out a mortgage he could afford, he doesn’t have to worry about home prices dropping. He can keep making his payment while prices recover.

          The point isn’t that the government can completely disappear, only that their oversized regulatory role doesn’t work. They don’t move fast enough to respond and react to changes in the marketplace before many consumers will be burned. It is much more feasible to tell individual consumers to wake up and pay attention to the products, services and investments they are purchasing.

          • Polish Engineer says:

            While I agree people need to be more savvy, I must disagree on your point that there was a consumer at the end of every transaction on bundled mortgages. Many of those transactions are banks investing their own capital, taken from the fees they charge to take care of your money. 70% of all trades now are algorithm based, many of which are simply performing high volume trading to skim small percentages off the top of minute fluctuations. Those aren’t consumer driven transactions.

            While consumers should strive to be educated, it is impossible to know everything about everything. I take my car to the mechanic because he knows how to take care of it. I did research and picked the best one I could, but that still doesn’t mean he won’t try to swindle me. Same with my money, I picked the best institutions and funds that I could with the knowledge that I had, but still got swindled because I can’t be in every boardroom listening to every discussion. Therein lies the job of the SEC, to uncover both individual and systemic issues with the market which I am not and never will be privvy to because I have to work during the day.

            • Gaz says:

              You’re conflating the total number of trades made with total market capitalization (and thus potential for loss). In any case, I don’t think it was really at the core of your point anyway.

              Consumers don’t need to know everything, but what I’m suggesting is that we all need to know a lot more then we do now. About 1/2 of the posts that go up here on Consumerist have at their core that someone failed to understand the deal they were getting. No doubt companies have some responsibility in obfuscating terms and conditions, but the consumers do as well for jumping in half blind and then being surprised when they get burned.

              I think we’d be much better off if most consumers stayed away from complicated investment vehicles, if they don’t understand it, don’t put your money in it. That may mean lots more money is sitting in money market accounts at your local bank, but that stability is looking pretty good right about now. As it stands today, people are counting on the SEC to do a job it has never been able to successfully do. They’re really just rolling the dice that they won’t get caught up in an investment that goes south. That isn’t a viable strategy.

              • Polish Engineer says:

                I agree with about 90% of what you said. Paying attention will keep you out of trouble 90% of the time, and the general populace should stay away from complicated investments.

                I guess what makes the GS and hence Wall St situation different is even if you paid attention, and only signed up for those things you fully understood, you still got burned. People who just plunked their money in S&P index and let it ride saw massive hunks of their investment vaporize because banks were gaming the system.

                There always has to be a referee on the field. To certain extent, we must assume the that ref will call a fair game or nothing would ever get done. You can’t test every toy you buy your kid for lead. It’s just not practical. It will never be perfect, but there is a certain degree of reliance on the ref that cannot be avoided.

                I think we are talking at the same point from different angles. You feel the consumer should take up the slack in light of the governments inability to perform and I feel the government should get in gear and deliver the services it claims to provide. In light of the government’s track record, it’s probably a better bet to go your path, but the idealist in me thinks it can be done.

              • peebozi says:

                Corporations have armies of liars, er lawyers, on their side.

                Corporations have no moral or ethical duty, only a duty to their shareholders to extract as much “value/money” by any means possible.

                Corporations have no moral or ethical duty and they have armies of liars on their side. this is one of the worst possible combinations a society can manufacture…the worst would have to be politicians/lawyers and their army of lawyers. lawyers working for lawyers to fuck anyone out of as much of anything of value as they can.

                FACT: There have been ZERO lawyers who have died from shark attacks in the past 200 years. It’s called professional courtesy…FACT!!

        • peebozi says:

          Sorry, i have to disagree. the homeowner could choose to rent and not be a homeowner. or they could choose to save $100,000 and pay for their house in cash. :-)

      • peebozi says:

        You are 100% correct. Get the government out of private business and the free market will work itself out.

        If i don’t like a bank i’m dealing with i simply withdrawal my deposits (some of which reach the 4-5 figures). When the bank sees a .0000000000000000082% hit to its deposits it will certainly take notice!

        I have yet to see this actually work but, in theory, it’s what the free market is all about.

        PS – It’s impossible to have a free market and ANY government regulation. It’s also impossible to have a free market without the inevitable single conglomerate eventually emerging (as well as price collusion and eventual indentured servitude.)

        • I-man says:

          The principle that free markets are more efficient and will weed out the bad apples only works when both sides have equal information. If one side knows something that would affect the value of the trade that the other side doesn’t, the market will not arrive at the optimum price. In the case of the recent financial meltdown, a lot of what happened was because one side (i.e. Goldman-Sachs) knew the financial instruments were crap while the other side (AIG, etc.) didn’t. The role of the government should be to set rules that force companies to divulge the information so that both sides can make informed decisions and therefore not end up buying a pig in a poke.

    • banndndc says:

      The 0% from the fed that gets turned around and invested at 2% in t-bills is what is so depressing. it really takes away the sting when part of the govt fines them and then they borrow the money to pay for it from another part of the govt (for free) and finance it by selling it back to the govt at 2% interest.

      if profits are guaranteed the market is not free.

      • peebozi says:

        +100,000,000 (coincidentally, goldman’s daily profits from producing….uh, um a 640 trillion dollar derivatives market?)

  5. TailsToo says:

    So once again, executives at a big business commit crimes, and they’ll get away scott free with the shareholders the only ones paying the penalty.

    This has to stop – if there’s no repercussions for the actual people who gave the direction to commit the crime, then the crimes will continue. If you’re running a big company, why not take tens of millions, then later on settle and let your shareholders pay the bill?

    Send someone to jail. Or claw back those ill gotten gains. Then maybe business leaders will wake up and actually try to do what’s best for the businesses, and not what puts the most cash in their pockets the quickest.

    • Gaz says:

      It may be useful to go watch the congressional hearings that were a part of this investigation. I’m no lover of Goldman Sachs, but don’t let the media hype convince you that the SEC was on some sort of epic quest for justice. They were after them for some relatively minor disclosures. Settling for Goldman Sachs in this case is a good idea not because it serves some nefarious end, but because they investigations cost a tremendous amount of money for the company and fighting them often isn’t worth it, even if the SEC is wrong.

      • TailsToo says:

        Just because it’s expensive, doesn’t mean it’s right to settle. People would be outraged if the government said it would be expensive to try and prosecute a rich murder suspect, but his butler (like the shareholders in the Goldman case) will just pay a fine while he admits no wrongdoing.

        If there are never any consequences, why would any CEO care about doing some illegal? Even if it’s something minor, if laws were broken, then they need to be investigated.

    • craptastico says:

      the problem with your logic is that they didn’t commit any crimes. there’s a big difference between stupid and criminal, and only one of them can usually be punished by law

      • TailsToo says:

        Is this really a case of being stupid? They build complex financial instruments, didn’t disclose to investors that a party betting against them helped in the construction, then collected plenty of fees to enable this whole interaction.

        Their argument that this was a marketing oversight is clearly a way to weasel out of it.

  6. NahWukkers says:

    The biggest insult here is that any amount Goldman Sachs pays will not come close to the profits it made being such a pirate, and not appreciably affect the bottom line – it’s the golden rule doncha know – them what has the gold makes the rules.

    • Commenter24 says:

      The SEC isn’t going after Goldman for being a “pirate” or “bringing down the economy” or being a “vampire squid.” The SEC is going after Goldman, primarily, because of a specific deal in 2007 in which Goldman supposedly didn’t make proper disclosure to investors regarding the fact that the person on the other side of the deal, the one betting against the investors, participated in selecting the securities that would make up the package being sold. IIRC, Goldman made ~$40mil off the deal.

      • NahWukkers says:

        I think Goldman’s actions – the deeds for which it is being pursued by the SEC – amount to modern-day piracy – don’t you? The only difference is that no violence or threat of violence was involved. Some kill with a sword, others with a pen. I’d also like to know what Goldman settled for. If less than the profit off the deal, then the SEC is scarcely a deterrent for Goldman is it?

        • Gaz says:

          The SEC investigations don’t have to do with them upturning the financial markets and causing global chaos. The most serious one involves them not sufficiently disclosing that different divisions of Goldman’s may be betting in different directions. From the testimony I heard when they went before the Senate, they actually lost money overall on that deal.

          I don’t know that it qualifies as piracy, I don’t believe it was intentional even if I really abhor the company overall. Whatever your general opinion of Goldman’s is, the SEC investigations are tackling a really tiny fraction of any real problem that exists.

        • Commenter24 says:

          I think you’re being dramatic and you’re letting your (probably misplaced/misunderstood) hatred for Goldman get in the way of understanding the real situation. “OMG! Goldman is full of rich people! Evil!”

          • NahWukkers says:

            I don’t hate Goldman Sachs – I wouldn’t waste an emotion on Goldman Sachs. I just think that their conduct here was less than forthright, as, apparently, did the SEC. If the conduct was inadvertent, then the result is likely negligence. If it was deliberate, then it’s potentially fraudulent. From Goldman’s public pronouncements, it appeared to consider its conduct to be perfectly legal (it did not say that it was inadvertent, but rather sought to justify the apparent disingenuousness of its conflicting positions – boosting versus hedging) – thus it was done deliberately. Now if the law is less than forthright also, Goldman may have a point that its actions were legal – thus leading to the settlement with the SEC. My point is the sheer fact that Goldman considered this conduct to be proper is bad – in my (albeit ignorant) opinion. In any other business, this would certainly be thought of as verging on fraud. Boosting on the one side, betting against on the other. Selling a product as state-of-the-art, and then betting that it will break down within (say) 6 months. I know it’s not a perfect analogy. Sorry. Something is just not right here.

  7. Dean says:

    Considering the fact that the SEC / banking industry is a revolving door system which primarily serves to help companies circumvent regulation and obfuscate corporate practices, this is hardly a surprise.

    What “should” happen is inconsequential: there is no real incentive for bankers and sec investigators to practice sound accounting or investigations – who consistently get kick-backs in the form of lucrative job opportunities with large banking firms upon leaving the SEC.

  8. H3ion says:

    Sounds like a great idea if it is coupled with a guilty plea and the people that actually perpetrated the crimes receive at least some minimum jail time. Typically, there would be a consent to an injunction as well so that if there was a repeat, a contempt citation would issue.

    • Gaz says:

      Go read about these SEC cases, they aren’t that serious. The big one that involved congressional hearings basically boils down to two different divisions of Goldman Sachs betting in different directions, ultimately leading to Goldman losing money on the total net deal. They’re in trouble for not sufficiently disclosing to investors that some other arm of Goldman might be going in a different direction. It’s a problem, but it isn’t a send someone to jail problem.

      • Commenter24 says:

        This. Everyone seems to think that Goldman is under fire for some sort of uber-serious Enron-like crime; it’s not. Goldman is under-fire over a few disclosure issues. This is only getting a lot of press because it’s Goldman and it generates public outrage.

        • peebozi says:

          Yea, what about them FRAUDULENTLY valuing their insured asset to a degree that would, in effect, force AIG out of business. Their valuations were not accurate but AIG, and many others, had no way to value these instruments because only goldman knew what they really contained.

          Also, Goldman alum negotiated the bailout deal to ensure goldman (who had insider information on the potential deals) was paid 100 cents on the dollar when this could have EASILY been negotiated down to values others were accepting.

          And let’s not even start to discuss the scapegoats of Lehman & Bear Stearns. They weren’t doing anything too different than goldman, citi & jp morgan….but they didn’t have the cronies in government to work the sweetheart deals and, more importantly, glodman, the government, et al, needed scapegoats.

          • Gaz says:

            The SEC isn’t investigating GS for fraudulently valuing CDO’s. They certainly could if they had any reason to believe it occurred. Instead, the best evidence points to the fact that they were just foolishly believing that the endless increase in home prices would continue for the life of the derivative (not THAT far fetched, but still a bad assumption).

            I’m not sure if you watched the congressional hearings on the crisis, but there was a useful, if somewhat frustrating exchange relating to the 100 cent payouts that have gotten such media attention. The choice to pay out at 100 cents on the dollar was because if that payment wasn’t made, they would have been defaulting on some portion of the balance, at which point GS’s default insurance would have kicked in and exacerbated the problem. In there mind, it was better to pay out then trigger a default and let AIG fail, nothing “EASY” about that decision. I’m not saying it was a good call in retrospect, but it certainly isn’t the tinfoil hat variety being thrown about now.

            My whole point in all of this is that the system grew much to complex with consumers buying up whatever was being sold. Why would AIG et al buy/insure derivatives they didn’t understand? Why would companies/pension funds/fund managers purchase derivatives and equities tied up in markets they didn’t spend time figuring out? It is all a disaster waiting to happen.

            • peebozi says:

              Short answer: i disagree.

              Long answer:
              The SEC does have testimony from former AIG executive that they needed to take goldman’s word for it because they were the only ones who knew what the securities actually contained. the limp-bribed-whores at the SEC & DOJ won’t do shit because they want a payoff when all this finally goes away.

              goldman insisting AIG pay 100% insured value could have been taken to the courts and delayed until the figures were confirmed. their agreement didn’t allow that? ok, let goldman sue and go to court to present the evidence. problem gets exacerbated and now goldman has to tell congress that they demand 100% of the insured value and additional costs/fees, etc. also, PAULSON was the POS who used TERROR to extract $700,000,000 from the US citizens…a former goldman exec.

              consumers didn’t cause this…banks, allowed to lend 30 times their deposits and creating a 600 trillion dollar derivatives market caused this. 260 million consumers who own 20% of the wealth in the US didn’t cause this. the 20% of shits who own 80% of the wealth caused this…as well as those corporations who now enjoy the full rights of a person (less the dying and threat of jail for criminal behavior).

              • Gaz says:

                If your point is that the government is proving to be wholly ineffective and corrupt, I agree. Instead of asking that they act as the impartial referee protecting their citizens, a job they’ve never done competently, we’d be better off controlling the market by insisting that individuals are responsible for their decisions, investments or otherwise. Then if 20 rich idiots want to get together and blow cash on stupid investments, they can do so with little effect on the rest of us. Presently we have 20 rich idiots doing as they please and 80 poor idiots trying to follow along behind them assuming everyone upfront knows what they are doing.

                Incidentally Andrew Forrester (the AIG Executive you mention) said they relied on Goldman’s pricing model because it had proven accurate in the past and would have taken too long to evaluate everything themselves. So they didn’t know exactly what was in the CDO’s because they believed Goldman’s model, not because there was some conspiracy to ignore it. A stupid decision under any banner, but again, not a conspiratorial one.

  9. Mr Fife says:

    Goldman’s is afraid the SEC will find something they have kept hidden so far.