Thursday, July 15, 2010

$550 Million Settlement for Goldman Sachs

Goldman Sachs will settle with the SEC for $550 million over charges of fraud related to Goldman's sale of subprime mortgage products.  Goldman neither confirmed nor denied wrongdoing, but "acknowledged that its marketing materials for the subprime product contained incomplete information."  The SEC seems pretty proud of the settlement, noting:

Half a billion dollars is the largest penalty ever assessed against a financial services firm in the history of the SEC," said Robert Khuzami, Director of the SEC's Division of Enforcement. "This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing."
However, as The Conglomerate notes:
Goldman Sachs is the 39th largest company in the U.S. according to Fortune magazine.  Last year, it had $13 billion in profits.  It's bonus pool was half its revenue, $16 billion.  I guess whether $550 million is a big penalty is not a rhetorical question, it's an empirical one.  Today, Goldman's stock went up almost 4.5% [while the S&P 500 gained 0.1%].  


  1. They just got a slap on the wrist. Doesn't make me happy one bit.

  2. I agree--doesn't seem like much of a deterrent for future frauds...