Goldman Sachs has agreed to pay the SEC $550 million to settle charges that it misled investors in the marketing of the collateralized-debt obligation known as "Abacus," with $250 going to the investors, who lost $1 billion, and the remaining amount going to the Treasury. In a press release, SEC director of enforcement Robert Khuzami tried to make this sound like a victory.
“Half a billion dollars is the largest penalty ever assessed against a financial services firm in the history of the SEC,” he said. “This settlement is a stark lesson to Wall Street firms that no product is too complex, and no investor too sophisticated, to avoid a heavy price if a firm violates the fundamental principles of honest treatment and fair dealing.”
Well, when you put it like that ... actually, no, even when you put it like that, John Paulson still made twice as much as the settlement betting against Abacus, the deal netted Goldman untold billions by alerting them to the opportunities in shorting subprime, under the terms of the agreement they don't admit to any wrongdoing at all ... so yeah. Nice try, Robert. We guess "This settlement is a stark lesson to Wall Street firms that occasionally, to detract from our own inadequacies, we may harass them into tossing us a small transaction fee on their really really big deals" doesn't quite have the same ring to it.
Adding insult to injury, Goldman stock is up 5 percent on the news of the settlement, and adding insult to insult, said news was leaked by we-wonder-which-side seconds after the SEC issued a press release excitedly touting a "Major Announcement" they would be making at a 4:45 press conference. Better luck next time, SEC.