Felix Salmon

Does Justice care if Goldman settles its SEC suit?

By Felix Salmon
April 30, 2010

Why did Goldman stock fall so far today? It’s pretty standard practice for SEC complaints to get forwarded over to Justice, so the news that Justice was looking at Goldman could hardly have come as all that much of a surprise to the market. But perhaps Justice isn’t looking at Abacus: if it’s looking at Timberwolf instead, then that’s a whole new can of worms for Goldman to deal with, and would help turn one bad deal into a fully-fledged pattern of criminal behavior.

So while Henry Blodget is right to say that the falling share price will increase the pressure on Goldman to settle with the SEC, I’m not sure he’s right when he says that “it could also ease the pressure on prosecutors to file criminal charges against the firm.” Now that Justice is looking at the firm, it’s going to make its own decisions — and if it files a criminal case against Goldman, that’s going to be devastating for the firm whether it has settled with the SEC or not.

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At least according to the Journal, the Justice investigation “is centered on different evidence than the SEC’s civil case,” which doesn’t necessarily mean a deal other than Abacus but kind of suggests it.

Posted by zseward | Report as abusive

I would think that given the popular outrage toward Wall St. generally, combined with the SEC’s bungled handling of the BoA/ML bonus settlement, neither agency would be eager to settle with Goldman (assuming DoJ eventually brings charges). The people want blood. How large would a settlement have to be for public opinion to consider it anything but a slap on the wrist and a return to business as usual? Losing would be embarrassing for the government, but might continuing to appear to be enabling naughty bank behavior be worse?

Posted by cdudko | Report as abusive

I’ll tell you what would be political – a premature settlement would be both politically depressing and depressingly political.

Notorious crooks buying their way out of legal trouble is always political. Subsidizing AIG to pay out bad bets it made with Goldman was political. Larry Summers, Geithner and Gillibrand’s attempts to undermine, dilute and then suffocate Blanche Lincoln’s regulatory model are sickeningly political. Paralytic bipartisan inability to reinstate Glass-Steagall is political…

But investigating opaque situations rife with criminal opportunity is not.

Justice could be looking at High-Frequency Trading, Abacus, the Wolves or any other of Goldman’s clutch of exploits with names reeking of nostalgia for crimes of corporatism enabled by the Waffen-SS. I trust Justice to look into all of these, investigating as relentlessly and impartially as they ought. And about time, too.

Blodget meanwhile is mistaken in attributing political motivation to routine criminal investigations which are by nature apolitical. At least until escalated for emasculation to the bodgers squatting on today’s Supreme Court whose recent collective dicta reveal them as lamentably political.

Posted by HBC | Report as abusive

After Buffett’s depressing proclamation that Goldman is the very embodiment of moral rectitude, and the revelation that he is in the process of arranging the nuptials of one of his granddaughters to Fabrice Tourre, all hope for fairness seems lost.

Lucas van Praag must be fuming, having lost a cushy job to an eighty-year-old from Omaha.

Posted by DanHess | Report as abusive

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