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Goldman Sachs Fine in Fraud Case: Wall Street Firm Can Afford It

3 years ago
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It sounds like a ton, and indeed the Securities and Exchange Commission says the $550 million fine imposed on Goldman Sachs to settle a civil fraud case is the largest penalty ever paid by a Wall Street firm. But for the company, one of the largest investment banks in the world, it amounted to about two weeks of profit. After all, the firm made $3.3 billion in the first quarter of 2010.

Pro Publica, the non-profit investigative reporters group, did the math after the SEC announced the settlement Thursday. The government had charged Goldman Sachs with misleading investors, who put millions of dollars in a subprime mortgage deal in 2007, just as the housing market was about to collapse. In effect, the unwary investors bet on mortgages that Goldman Sachs expected to fail.

Goldman Sachs did not admit wrongdoing, but agreed to change a number of its business practices and pay the hefty fine, in itself an admission that something was not quite right. Goldman said the so-called Abacus deal, which earned it $15 million in fees, "contained incomplete information."
Goldman Sachs headquarters, New York City
As for the fine, Pro Publica said it was less then one-tenth of the gain Goldman's stock enjoyed Thursday after word of the settlement -- and it was just a wee bit less than the $500 million the company pledged in late 2009 as a donation to help small businesses after criticism of its bonus structure.

Not only that, but Goldman Sachs could pay the fine immediately if it wished to, the Pro Publica team said, because the average worth of its assets that can be readily converted to cash was about $162 billion in the first quarter of this year.

The U.S. Treasury will get $300 million from the penalty while Goldman's unlucky investors will get the rest. The amount is only about eight times the pay of a single individual at Goldman Sachs, Pro Publica said. In 2007, CEO Lloyd Blankfein made $68 million in salary and bonuses.

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6 Comments

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copperkettle3

What exactly is it that Goldman Sachs creates to earn such large sums of money in profit?

July 16 2010 at 3:40 PM Report abuse rate up rate down Reply
1 reply to copperkettle3's comment
dagfarib

I know you're being facetious, but the answer is that they harm the american people.

August 11 2010 at 9:08 PM Report abuse rate up rate down Reply
JERRY

The settlement amount represents roughly 4% of the $13.4 billion in profits Goldman earned last year. In its first quarter of this year, the bank logged $3.5 billion in profits in the first 3 months,that doesn't sound like the government won, another victory for Wall Street and the crooked politicians.
What I don't understand, why are the crooked politician the lobbyist and the financial sector allowed to continue to rob America in broad daylight without a gun.
A 550 million fine doesn't sound like a win to me, against 13.4 billion in profits,when you have a too big to fail status,and is allowed to pay a fine without admitting any guilt you have a win-win situation, the politicians lose
but they have a win-win situation also it's not their money it's the taxpayers,it seems that the taxpayers are the only ones who lose when the opponents are politicians and big business.

July 16 2010 at 1:09 PM Report abuse +4 rate up rate down Reply
1 reply to JERRY's comment
WHO EVER WHAT EV

How much should they have to pay? If we fined based on pay does that mean traffic fines should also be based on pay? Should other fines levied on businesses be based on profits? Where should it stop?

July 16 2010 at 1:27 PM Report abuse -1 rate up rate down Reply
ettu

Something just doesn't add up, at least not for me. Where was the financial crisis, if this one company can afford to pay $500 million in fines?

July 16 2010 at 11:22 AM Report abuse +6 rate up rate down Reply
1 reply to ettu's comment
wolfsonnydiane

there paying the 500 million out of the billions of no strings attached money republicans gave them

July 16 2010 at 1:06 PM Report abuse -2 rate up rate down Reply

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