It may have been a record fine for a financial institution but it appears investment bank Goldman Sachs got off lightly. The whole affair brings in to question the strength of the Securities and Exchange Commission’s case.
The “great vampire squid wrapped around the face of humanity” agreed to pay $550 million to settle fraud charges. But crucially it did not admit guilt for misleading clients over subprime mortgage products.
Even the SEC appears to have decided no fraud was committed and accepts Goldman made a “mistake” in its marketing material. It has failed to hold Goldman’s feet to the fire.
What is $550 million to Goldman Sachs? Well, two weeks earnings or the total compensation for about 1000 of its 32,000 employees.
“They pay $550 million and they get an $800 million pop in their share price,” Kevin Caron, market strategist at Stifel, Nicolaus & Co. told Reuters.
“The implication of the math is that the market had discounted a more harsh treatment and relative to what the market was looking for they got a pass - they got of easy.”
So the market was expecting worse - by the end of Thursday Goldman’s market value had soared by $6.6 billion.
The victims of this “mistake” do get compensated.
Germany’s IKB and the Royal Bank of Scotland get $150 million and $100 million respectively.
Others will be forming an orderly queue, but Goldman and its Wall Street brethren will be heaving a sigh of relief that the penalty won’t be larger.