News has been spreading that Goldman Sachs is close to reaching a $1 billion, or possibly higher, settlement with the SEC. That’s a total rumor, based on some people reading far more into a statement by Goldman CEO Lloyd Blankfein, when he said in an interview with the Economic Times concerning transactions the company made, that he regrets having “brought too much leverage into the world.”
From that statement, and entire narrative has emerged which not only made some think there would be a settlement, but then the figure that a settlement of $1 billion or above was in the cards for the company, sending the share price of the giant financial institution skyrocketing.
One thing it does show, in spite of it largely being a rumor, is the market does consider it important for Goldman to take care of the situation.
As far as the SEC, I’m increasingly thinking they are punishing Goldman to gain favor, and are basically shaking them down to grab some of their capital.
In the economic climate we live in, and the banks in disfavor with the public, it’s easy for the government to attempt to transfer the focus from themselves to the banks, which have come to be hated by a lot of people.
Of course the government has been out of favor also, as the majority of Americans didn’t want the bailouts to happen, and some of the banks didn’t either.
Now politicians continue to scramble to cover their rear-ends in order to keep their positions, which are increasingly in danger of being lost.
Even Warren Buffett has said the case against Goldman is very weak, and the underlying reasons for pursuing it dubious at best. That seems to imply there’s some shenanigans going on, as Buffett is very reluctant to criticize the government, and hasn’t done it much throughout his lifetime; another reason to take a second look at the overall picture and reasoning behind the alleged fraud case.
The SEC and U.S. Government know the public sentiment is against the banks, and Goldman Sachs has become the whipping boy of the media and government, becoming the poster child of excess, when in fact much of it isn’t even provable, and in some cases inaccurate.
Much of this is Goldman Sachs fault from the point of view of poor ways of communicating and the way they’ve presented themselves, but that’s not illegal, and while sometimes in poor taste, is irrelevant to being shaken down to punish them as the face of the banking institutions which have come under such strong scrutiny, and in some cases, unfair assertions and conclusions.
For the $1 billion settlement, that’s just a theory cooked up and circulating around the news rooms and Web. There’s no proof of that, and nothing to indicate that could even happen, as settlements aren’t aren’t a given, and judges can reject them if there isn’t a good reason given as to what the amount is. That can be if the amount is too low or too high.
Either way, it’s doubtful a judge would approve of a settlement this high, as it would be unprecedented, and about double what most other similar settlements in the past have been.
As to what I think is a shakedown, governments continue to take steps to curry the favor of the public, when the cost of their intrusions will result in higher prices from companies who have to continue to pay out these types of settlements in order to get rid of the unproven accusations.