Goldman Sachs: We didn’t do anything wrong but we’ll pay the $550M fine anyway
Goldman Sachs & Co. has agreed to pay $550 million to settle civil fraud charges that the Wall Street giant misled buyers of mortgage-related investments.The settlement was announced Thursday by the Securities and Exchange Commission hours after Congress gave final approval to the stiffest restrictions on banks and Wall Street since the Great Depression.
The deal calls for Goldman to pay the SEC fines of $300 million. The rest of the money will go to compensate those who lost money on their investments.
The penalty was the largest against a Wall Street firm in SEC history. But the settlement amounts to less than 5 percent of Goldman’s 2009 net income of $12.2 billion after payment of dividends to preferred shareholders — or a little more than two weeks of net income.
While Goldman agreed to pay the staggering sum, they claimed that they actually didn’t do anything wrong or illegal. Huh? WTF? Then why pay the settlement?
Goldman acknowledged Thursday that its marketing materials for the deal at the center of the charges omitted key information for buyers.
But the firm did not admit legal wrongdoing.
In a statement, Goldman said “it was a mistake” for the marketing materials to leave out that a Goldman client helped craft the portfolio and that the client’s financial interests ran counter to those of investors.
“We believe that this settlement is the right outcome for our firm, our shareholders and our clients,” the firm’s statement said.
OK, so everyone makes mistakes, right? Unfortunately this one cost investors upward of $1B. Even more unfortunate, only two of the biggest losers will get anything out of it.
Of the $550 million Goldman agreed to pay, $250 million will go to the two big losers in the deal. German bank IKB Deutsche Industriebank AG will get $150 million. Royal Bank of Scotland, which bought ABN AMRO Bank, will receive $100 million.
Goldman will also pay back $15 million in fees it collected for managing the deal. The remaining $535 million is considered a civil penalty.
The rest will go to the government – screw the other losers.
Somehow in the twisted world of Wall Street, this was seen as a good thing for Goldman stock – probably because industry experts were expecting a much larger fine.
Word that Goldman had settled began leaking about a half hour before stock markets closed and appeared to please investors. Goldman had been trading at about $140 a share. The stock rose to close at $145.22, up $6.16, and shot up to $153.60 in after-hours trading.
No doubt their friends in high places helped soften the blow. For more on this vampire and their cozy government relations:
- Goldman spends $43M on congress since 1989. (This figure is actually higher since the article is 18 months old.)
- Goldman Sachs revolving door in government. A list of Goldman/Government?Goldman employees (from about 1985 or so).
- Interactive graphic showing the web of Goldman entanglement with government. Just try to follow all the various ties – it’s mind boggling.
- A comprehensive website for all things evil about Goldman Sachs.