SEC No Match For Government Sachs

Now let me get this straight.  Goldman Sachs (GS), aka "Government Sachs", has just received the largest penalty ever imposed on a financial firm.  Yes, a whopping $550 million. 

Relative to Goldman's 2009 net income of roughly $12 billion, this represents less than 5%, or about two weeks worth of earnings.  In the case of British Petroleum (BP), they were arm-twisted into establishing a $20 billion escrow fund, or about 15 MONTHS of 2009 income.  BP's escrow fund is to compensate victims.

For Goldman's victims, they were assessed $300 million, payable to 2 European Banks.  Forgive me, weren't there a whole lot of other victims?  So, BP is paying about 70 times that of GS.  Seems reasonable to me.

BP's market capitalization has fallen by about half from peak to trough, a wipe-out on the order of $100 billion.  BP's shareholders are the public.  Goldman's market capitalization is down only 20%. It's shareholders are very largely Government Sachs alumni in senior policymaking positions.  And, of course, management.

Are you beginning to see the problem here?

BP may still have stiff penalties imposed on it.  The investigation is far from over.

Ok, so one company's alleged negligence led to economic disaster and the other's to ecological disaster?  Is one that many times worse than the other?

Could the difference have anything to do with the rather sizable number of GS alumni in the government?  Lloyd Blankfein walks away unscathed.  Tony Hayward is driven out of Dodge.

Goldman's settlement permits it to walk away, while admitting virtually NO wrongdoing.  Do you think that BP will be so lucky?

One can assume that investigators and senior officials of the SEC knew what they were doing.  After all, why would they EVER want to bring down their future bosses?

Goldman officials praised the settlement.  Yes, you read that correctly.  Goldman officials praised the settlement!  Doesn't that, in and of itself, say something?  Do you think for one minute that the remaining BP officials will be thinking what a great deal they got?

But, Goldman had another huge reason to celebrate:  the passage of the financial reform bill.  Not only are Goldman's business interests protected, but the bill establishes new regulatory bodies.  A full employment act for Government Sachs at government expense!

Marko's Take