The news of Goldman Sachs's settlement with the SEC is just breaking, but it's not too early to make a few observations.
1. We told you so. (See the May 19, 2010 item here under the headline "Looks Like Goldman Will Settle.")
2. It's unsatisfying. It's unsatisfying if you think Goldman didn't do anything wrong, because, under the settlement, the firm will have to disgorge $550 million, which is a lot of money to pay if you didn't do anything wrong. It's unsatisfying if you think Goldman did do something wrong, because, under the terms of the settlement (at least according to a New York Times news alert) Goldman will not have to admit any wrongdoing. If you think Goldman actually did do something wrong, that seems to fail to do full justice to the matter. And it's unsatisfying if you are not sure whether Goldman did something wrong, because the settlement leaves the matter vague. The message is that firms may be forced to disgorge hundreds of millions of dollars even if they didn't do anything wrong.
3. Maria Bartiromo of CNBC was just on the air suggesting that the SEC settled in part because "They do not have enough people, enough resources," to do their job. That's preposterous. The SEC's budget has more than tripled from 1995 to 2010, going to $1,026,000,000.00 from $284,755,000.
Update: The SEC press release is here: "Goldman agreed to settle the SEC's charges without admitting or denying the allegations." At the press conference, SEC enforcement chief Robert Khuzami, who spent from 2002 to 2009 as a top in-house lawyer at Deutsche Bank, referred only to $15 million as a disgorgement, characterizing $535 million as a penalty. He said that $300 million would go to the U.S. Treasury, while $250 million would go to compensate harmed investors. It's interesting that all the money to compensate these harmed investors has to come from Goldman Sachs, and none of it from John Paulson or his firm Paulson & Co., which have not been accused by the SEC of any wrongdoing.
