I've got nothing concrete on this, but there's a rumor Goldman is willing to cough up $5 BILLION to make the fraud case go away. That's right, kids, NINE FUCKING ZEROES. That is unbelievable. I saw it at the bottom of the Daily Short Report and I'm wondering if it's even possible. Anyone have anything on this???
Word on the street is that Goldman may settle the case against them for a whopping $5B. Stumbling block is the regulators want them to admit the fraud, and they want the traditional cover of not-admitting or denying. Supposedly, GS says they will pay any amount, but an admission is a deal breaker. Will keep you posted.
I'll believe it when I see it. I still don't think the SEC has a solid case against Goldman. The Abacus deal was partially crafted by Abacus and they're also a big sophisticated investor. Expected outcomes would suggest that $5B is too much unless there's a lot more skeletons in the closet.
It's not like the reputation damage is a real threat. People still worship at the Goldman altar.
They already have lost like 40billion, reputational damage is done. I am sure they would gladly pay $10billion 3 months ago now.
$40Bn of fluctuation in market cap is very different than $40Bn cash outflow.
Exactly, even if Goldman was trading at a P/CF of 1, operationally, losing $5B in cash is different than the shareholders losing money.
Good point BC
Plus that MV "damage" is more likely to be caused by fear/uncertainty and shorting of the stock rather than clients and talent fleeing the company. Goldman doesn't do business with welfare sucking populist peasants. Their clients would probably be labeled as evil speculators as well (Abacus).
So I'll believe it when I see.
Good post Davey +1. GS's clients are big boys and have their own research departments. Market makers take the opposite side in any transaction anyway and Goldman is expected to hedge risk as a responsible corporation. If they didn't and stock holders lost money, they'd be sued for criminal negligence.
What reputational damage?? You can't just use the 40bn drop in market value and say that quantifies loss of reputational goodwill. They structured this deal for the client and at the behest of the client and it made the client a bucketful of money. Everyone knew by that point Paulson was maaad short MBSs, yet there were still willing buyers to go long. Market is zero-sum game, for every winner there's a loser. They should've done their due diligence and probed deeper into wtf they were investing in.
If all that is true (and I'm not saying I disagree), why is Goldman talking settlement? I'm not talking about this $5 billion rumor, but it's no secret they've been trying to work something out behind the scenes.
Makes you wonder what the Feds found if there is any basis to this rumor.
^^Like I said, there's a good chance that there are other skeletons in the closet but $5B is a heft price to pay for the possibility of a law suit. Last week it was supposedly a settlement deal in the hundreds of millions, now it's in the billions? Sue me for anchoring bias but I'm skeptical.
where would the $5B go if Goldman pays out?
@CMoss
Good question. Abacus made money on that deal so I doubt there's be any compensatory damages. It would have to be punitive damages paid to the government because some SEC wannabe has a bug his butt.
I'm not a lawyer but that's my 2 cents. Anyone have an expert opinion on this?
Don't see why GS would settle, especially if they have to admit fault, considering the SEC is supposedly poking around a bunch more of these deals - if they have to pay $5bn every time an SEC staffer doesn't like a partciular deal, that's going to add up pretty quickly.
It's just the beginning when it comes to this kind of shit. Here is another suit filed against Goldman yesterday or the day before by an Australian hedge fund that obviously should have known better.
http://www.reuters.com/article/idUSTRE65637X20100609
Utterly specious lawsuit, but I guess it's worth a shot. Expect to see plenty more of these, especially if Goldman settles for big money.
Despite a healthy rally in the market, especially the financials, Goldman set a new 52-week low today. Might be something to the rumor.
Why did all the institutions sell off the stock right away when the SEC report went public? Why has the stock not rallied at all? Why have none of the big boys, Paulsen size guys said "GS" is undervalued its time to buy.
Say what you want since that SEC report, there is not once peice of proof besides Buffet keeping his shares, that shows institution have forgiven GS and bought back in. If I have a PM at a large mutual fund, and after the SEC report GS just eff'd me, I may not be buying back in so soon. That is the reputational risk I am talking about.
I think the $5B settlement would be bad news and unleash a series of institutional investor lawsuits (think pensions)
Edmundo, John must have appreciated the linkout!
http://www.thedailyshortreport.com/2010/06/tabacco-short-stupid-idiot-m…
yah i guess he dug the shout out, edmundo
Unlike Goldman Sachs, short sellers actually do God's work. He's doing a good job over there.
All the SEC wants to do is make it appear as if they actually have balls. If they seriously thought that deals like Abacus and Timberwolf were criminal or wrong or shitty deals or whatever, they would be hardcore investigating every single bank on the street that ever made a synthetic CDO, and being as obvious about it too. Instead they're trying to make Goldman the fall guy for everybody else with this dog-and-pony show.
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