Sanford C. Bernstein & Co. analyst Brad Hintz said in a note to clients today that Goldman Sachs (NYSE:GS) could pay $621 million to make the SEC fraud charges against them go away.
Hintz said the fine would be $250 million, and the other $371 million would be to reimburse investors in the trades.
Personally, I’ve never like these particular charges, as they’re bogus to me, and the SEC probably knows that. Warren Buffett addressed the issue not too long ago, saying the idea that Goldman should have revealed their positions which could have been the opposite of those they were collateralized debt obligation for was ludicrous, as no one could possibly no or have the right to know what the person across from them was going to do.
As Hintz said, “While this would be painful to Goldman, we believe it would allow both Goldman Sachs and the SEC to walk away declaring ‘victory.’ Certainly Goldman wants this case settled. Its management has stated that it wants a ’normal’ relationship with its regulators.”
The SEC assertion that Goldman Sachs concealed that hedge fund Paulson & Co. had taken a position against the collateralized debt obligation is dubious at best. Again, they had no reason whatsoever to conceal Paulson’s position at all, as that’s the way that particular type of business is done.
To say they concealed it would be similar to someone saying while they were investing in a particular stock, I in turn was shorting it. To reveal that information wouldn’t come to my mind or even be part of a conversation I would have with them.
That’s similar to what the SEC is saying Goldman did, and they’re calling it fraud.
Unfortunately the SEC is taking advantage of negative public sentiment against Goldman to extort capital from them and keep them on the defensive.
While Goldman hasn’t been innocent in everything that has went on in the banking industry, and they’ve made some dumb comments, in this case this is just wrong, and they shouldn’t be punished and vilified for what is simply the way this particular part of the financial industry business is conducted.
Because the majority of people don’t understand what this is all about, the SEC is getting away with it, knowing Goldman Sachs can’t afford to continue having their reputations tarnished in the public eye.