Press Release: Goldman Sachs to Pay Record $550 Million to Settle SEC Charges Related to Subprime Mortgage CDO; 2010-123; Jul. 15, 2010

Press Release from U. S. Securities and Exchange Commission: as linked by Huffington Post

Goldman Sachs to Pay Record $550 Million to Settle SEC Charges Related to Subprime Mortgage CDO

Firm Acknowledges CDO Marketing Materials Were Incomplete and Should Have Revealed Paulson's Role

FOR IMMEDIATE RELEASE
2010-123

High-Res Photo



“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.”

Robert Khuzami
Director
SEC Enforcement

Washington, D.C., July 15, 2010 — The Securities and Exchange Commission today announced that Goldman, Sachs & Co. will pay $550 million and reform its business practices to settle SEC charges that Goldman misled investors in a subprime mortgage product just as the U.S. housing market was starting to collapse.
In agreeing to the SEC's largest-ever penalty paid by a Wall Street firm, Goldman also acknowledged that its marketing materials for the subprime product contained incomplete information.
CLICK HERE  for full SEC Press release

Goldman Sachs SEC SETTLEMENT Reached -- And Stock SOARS

July 15, 2010

The Securities and Exchange Commission has reached a settlement agreement with Goldman Sachs. The news was first relayed via CNBC's Twitter feed. The settlement comes on the heels of Congress's passage of a sweeping financial reform bill earlier today.

From the SEC's press release on the settlement:

Charlie Gasparino of Fox Business Network on Goldman Sachs

Editor's Note:  This story came to us via Fox Business Network who regularly notify us of stories Charlie Gasparino does on the FBN.  This particular story came in just ahead of the Breaking News - Goldman is going to settle with the SEC - published below in our Daily Links.  The relevance of this is the comment made by Goldman's COO - Gary Cohn - that "he would leave if he could".  The comment further states that among the reasons for his not leaving is the "myriad" of issues facing them including the SEC case.

What will be interesting to see is if once the SEC case is settled and behind them (a settlement was expected from the very beginning by this reporter) Gary Cohn does indeed leave Goldman.  His departure along with the "myriad" of other executives, I wrote about previously, continues to verify what Charlie previously also reported - the mood at Goldman is horrendous.

There is a shake up going on internally as the "fat cats" are deserting what could very well be a sinking ship.  You know the old saying, "God works in mysterious ways".  Lloyd Blankfein's attempt at doing God's work may just have backfired.  God may just be more particular of who is delegated to do his work.  But then again, "Lord" Lloyd Blankfein might just believe he is god in which case his disciples (employees) have come to their moment of reality - realizing he is not only mortal but immoral as well.

Below, with permission of Charlie Gasparino and Fox Business Network is the complete story.  Click here to view the original.

Thursday, July 15, 2010
Goldman COO: Would Leave If I Could
By Charlie Gasparino
FOXBusiness

As Goldman Sachs (GS: 145.22, 6.15, 4.42%) continues to seek a settlement with federal securities over probes into its business practice, people inside the company are bracing a significant change in senior management that goes beyond the possibility of CEO Lloyd Blankfein losing his job, FOX Business has learned.

Gary Cohn, the firm’s president and presumed heir apparent to Blankfein, should he step down, has told people on Wall Street that if he could he would leave the troubled Wall Street firm as well, according to people with knowledge of the matter. Cohn, however, is also telling people he isn’t going anywhere until Goldman is finished dealing with the myriad of regulatory bodies investigating the firm’s business practices, including a high-profile case recently filed by the Securities and Exchange Commission charging the firm with civil fraud over its sale of a controversial mortgage-related bond in 2007. Goldman has denied the charges.

Goldman spokesman Lucas van Praag said in a statement that “Gary has no plans on leaving the firm,” adding that “Blankfein and Cohn aren’t going anywhere.”

But people who know Cohn say while his departure isn’t imminent, he clearly would like to leave amid the near endless negative publicity hitting a firm once known as Wall Street’s elite investment bank. Cohn recently gave testimony to the Financial Services Inquiry Committee where he and several Goldman executives were grilled about the firm’s business practices and whether they contributed to the 2008 financial meltdown.

“Gary is like a lot of top guys at Goldman who would leave tomorrow if he could to start a hedge fund,” said one person with direct knowledge of the matter. “He’s pretty unhappy. But until the dust settles, he knows he has to stick around.”

Cohn became president of Goldman and Blankfein’s No. 2 executive in 2006, during a power struggle that saw the duo of former commodities traders take the reign of the big Wall Street investment bank. Blankfein and Cohn brought enormous profits to Goldman and a sharp run up in the company’s stock price by redirecting the firm’s business model away from corporate finance and advising on mergers and acquisitions toward taking risk in esoteric securities.
While the move brought -- and still brings -- enormous profits to Goldman and its shareholders, it also brought the firm a lot of controversy. Goldman, like the rest of Wall Street, benefited from a series of government bailouts during the financial crisis.

Meanwhile, the firm’s trading business has come under fire from regulators who claim that Goldman, in trading these securities, added to the instability of the markets in 2007 and 2008, and took advantage of large clients to make money, both of which Goldman denies.

Cohn, according to people with knowledge of the matter, has all but conceded privately that if Blankfein steps down—a possible condition of any settlement with the SEC -- he won’t become the next CEO. Blankfein, of course, may remain as CEO, but he may be forced to give up his job as chairman as part of a deal with regulators, people inside Goldman say, to someone from the investment -banking side of the business, which hasn't been the focus of scrutiny. Either way, that move will erode Cohn’s power inside the firm and could force him to leave.

..Goldman Sachs Links and News - July 15, 2010

SEC: Goldman Sachs to pay record $550 million and reform practices to settle subprime mortgage fraud charges.

BP: No oil flowing into Gulf of Mexico for first time in months as part of test of ruptured well. Watch live on CNN.com.

Senate gives final OK to bill meant to limit big banks, protect consumers and prevent future financial crises.

Goldman Sachs On How To Navigate The Slowdown | zero hedge
By Tyler Durden
Goldman, SEC Hold Catch-All Settlement Talks
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Good a$ goldman
New York Post
Goldman Sachs May Be Seeking a Broad SEC Settlement
DailyFinance
Threadneedle Appoints Goldman's Cielinski to Head Fixed Income
BusinessWeek

Henry Goldman's Granddaughter Talks About the Beginnings of Goldman Sachs

Lundborg: What do you make of the current situation?

Fisher: I find it disappointing. My grandfather and Mr. Sachs were very ethical, moral businessmen and what they really wanted to do above all else was preserve the Goldman Sachs name.

The following is an interesting short interview, republished in full from Bloomberg.com.

Henry Goldman's Granddaughter Talks about Feuds, Sachs, IPOs: Interview
By Zinta Lundborg - Jul 14, 2010  Bloomberg.com

“The entryway on Goldman Sachs’s executive floor is hung with paintings of all the senior partners since the firm’s inception,” says June Breton Fisher. “I took a close look and finally asked, ‘Where’s my grandfather?’”

He wasn’t there. No portrait, no photograph, not even a snapshot recalled Henry Goldman, the founder’s son whose financial innovations created the modern banking business.

Fisher’s book, “When Money Was in Fashion: Henry Goldman, Goldman Sachs, and the Founding of Wall Street” (Palgrave Macmillan), creates a vivid portrait of her grandfather, a man erased from Goldman’s history.

Lundborg: What’s your favorite memory of your grandfather?

Fisher: We spent summer vacations as a family at my grandparents’ home in the Adirondack Mountains. You could see him in a more relaxed mode, see the fun side of him, like when he went around in a cape and a crown.

Lundborg: Did you and he do things together?

Fisher: During tennis or croquet tournaments, I’d sit on the hill with him. Since he was blind by then, I’d be the sportscaster and tell him what was going on.

Lundborg: By then, he’d really revolutionized the business.

Fisher: He was a visionary in business: the progenitor of the IPO, the P/E ratio, and the Fed, plus he’d underwritten 56 major corporations that were the building blocks of the economy.

Junk From a Cart

Lundborg: Your great-grandfather Marcus, who established the firm, was even more impressive. He came to this country in 1848 as a poor immigrant and went from selling junk from a horse-drawn cart in Philadelphia to creating Goldman in New York. Yet at first, he asked his son-in-law, Sam Sachs, to join the firm. Not Henry. Why?

Fisher: He underestimated Henry, who was not voluble in conversation. Plus he’d dropped out of Harvard because of his bad eyesight

Lundborg: Henry finally joined Goldman in 1885, so what changed?

Fisher: The business had grown so fast, Marcus needed more help. Henry was not hired at the same level as Sam Sachs, but he immediately started to make a lot of money as a railroad bond speculator.

His mind was quick and he found a lot of new things to invest in. To me, what was most remarkable is that he laid out the plan for issuing preferred and common stock in a company like United Cigar in one hour.

Lundborg: What precipitated the bitter Goldman vs. Sachs feud?

Pro-German

Fisher: To begin with, it was the total disparity between Sam and Henry’s view of World War I. My grandfather was very pro-German and Mr. Sachs was pro-Ally. They yelled at one another about that for quite some time.

Lundborg: Until Henry finally left the company?

Fisher: He was angry and weary of all the conflicts, so he finally cleared out his desk and walked out. He took 15 of the biggest clients plus his share of the funds in the firm.

He’d been the most important partner, so he’d accumulated the most money.

Lundborg: Why did he love Germany so much?

Fisher: My grandfather spent six months of the year in Germany. He thought the German people were industrious, innovative in their work habits, and they loved children and flowers, which was the big line then.

Lundborg: Hitler helped him change his mind?

Fisher: Henry and his wife were in Berlin, where they’d always had a wonderful time. Now many of their former friends wouldn’t speak to them, they couldn’t get seats at the opera, and the ice cream parlor waiter they’d known for 30 years was reluctant to serve them.

Shoved Around

Even though he had a white cane, Henry was also shoved around on the streets. He realized the country had changed.

Lundborg: What was his response?

Fisher: He helped a lot of friends -- artists, writers and scientists -- get visas and work.

Lundborg: How did he become an art collector, despite his bad eyesight?

Fisher: He fell in love with paintings, and with the help of Joseph Duveen, acquired some great ones. His first major purchase was Rembrandt’s “The Apostle Bartholomew,” when he could still see.

He memorized all the details of each work and only sold the collection when he knew he was dying.

Stradivarius

Lundborg: Henry was also a great music lover. For Yehudi Menuhin’s 12th birthday, he bought him the 1733 Prinz Khevenhueller Stradivarius violin. How did the relationship come to end on such a sad note?

Fisher: He and Yehudi were very close -- he called him “Uncle Henry.” But his mother was very jealous and didn’t want anyone meddling in his life.

When Henry was bed-ridden, my grandmother wrote to Yehudi and asked him to come play Beethoven for him one last time. His mother said “No way.” Unbelievably, he was 19 by then and still obeyed her.

Lundborg: Goldman Sachs has been making headlines recently, but this is not the first time the firm has been involved in such controversy?

Fisher: No, Goldman was really pilloried in the 1930s. Waddill Catchings, the man who was brought in to replace Henry, was bright, but he was a scoundrel. He put together some investment trusts that made a lot of money until they crashed. It was all really just a Ponzi scheme.

Lundborg: What do you make of the current situation?

Fisher: I find it disappointing. My grandfather and Mr. Sachs were very ethical, moral businessmen and what they really wanted to do above all else was preserve the Goldman Sachs name.

To buy this book in North America, click here.

(Zinta Lundborg is a critic for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are her own. This interview was adapted from a longer conversation.)

To contact the reporter on this story: Zinta Lundborg at zlundborg@bloomberg.net.

Go to original article...click here