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\u2019s case.<\/p>\n
The \u201cgreat vampire squid wrapped around the face of humanity\u201d agreed to pay $550 million to settle fraud charges. But crucially it did not admit guilt for misleading clients over subprime mortgage products.<\/p>\n
Even the SEC appears to have decided no fraud was committed and accepts the Goldman made a \u201cmistake\u201d in its marketing material. It has failed to hold Goldman\u2019s feet to the fire, even if no one can question the size of the fine.<\/p>\n
What is $550 million to Goldman Sachs? Well, two weeks earnings or the total compensation for about 1000 of its 32,000 employees.<\/p>\n
\u201cThey pay $550 million and they get an $800 million pop in their share price,\u201d Kevin Caron, market strategist at Stifel, Nicolaus & Co. told Reuters.<\/p>\n
\u201cThe 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.\u201d<\/p>\n
So the market was expecting worse – by the end of Thursday Goldman\u2019s market value had soared $6.6 billion.<\/p>\n
The victims of this \u201cmistake\u201d do get compensated.<\/p>\n
Germany\u2019s IKB and the Royal Bank of Scotland get $150 million and $100 million respectively.<\/p>\n
Others will be forming a orderly queue, but Goldman and its Wall Street brethren will be heaving a sigh of relief that the penalty won\u2019t be larger.<\/p>\n