Wed, Oct 1, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

After Goldman Sachs’ settlement: RBS to seek more, Tourre denies fraud charges

Tuesday, July 20, 2010
Opalesque Industry Update – The U.S. Securities and Exchange Commission (SEC) gained a victory with the record $550m fine it slapped on financial giant Goldman Sachs Group Inc., to settle a civil lawsuit that claimed the bank had misled investors about a controversial subprime mortgage product it sold in 2007.

The SEC was not unanimous in its decision over the landmark civil case against the bank, the Wall Street Journal reported.

But while the amount may be the largest in banking history, the conventional wisdom in Wall Street is that the settlement was a victory for Goldman because the penalty was not large enough for a firm its size. The agreement will also benefit Goldman since the U.S. regulator did not require the bank to admit to any wrongdoing.

Early estimates by analysts had placed the cost of settlement to be over $1bn, according to Bloomberg. With the civil claims behind it, Goldman Sachs has ended a three month-old public relations nightmare.

News of the settlement added $3bn to Goldman’s market value on Thursday, and it further climbed after the close of the New York Trading, the report added.

"They pay $550m and they get an $800m pop in their stock price—they got off easy,'' Kevin Caron, a market strategist at Stifel, Nicolaus & Co in Florham Park, New Jersey told CNBC.

The suit, filed on April 16, accused Goldman Sachs of misleading its investors into buying collateralized debt obligations (CDOs) that one of its clients, hedge fund billionaire John Paulson, was betting on to fail. However, the criminal case against one of Goldman’s executives, Fabrice Tourre, who is central to the case, will not be dropped.

On Monday (July 19), Fabrice Tourre denied the charges being hurled against him, saying he had relied on Goldman’s legal and compliance department. He dismissed allegations he had misled or omitted facts in relation to the sale of the Abacus 2007-AC1 product.

RBS to seek more from Goldman
German bank IKB Deutsche Industriebank will get $150m out of the $550m Goldman agreed to pay. The money represents the whole amount IKB lost in the CDOs, CNBC said.

UK-owned Royal Bank of Scotland (RBS) will be receiving $100m from the settlement deal. However, RBS said on Friday it would “carefully consider all of its options” and try to squeeze out more money from Goldman.

RBS lost $841m on the subprime product known as Abacus 2007-ACI. Goldman’s settlement with the SEC allows RBS to file future civil suits and ask for $741m more to recover all its losses from the transaction.

Goldman will report its second-quarter results today. Some analysts have predicted the bank would perform 35% down because of the controversy.
-Precy Dumlao

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   

Banner

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Socially responsible investments grow in demand, but performance questions persist[more]

    Komfie Manalo, Opalesque Asia: A study by financial services firm TIAA-CREF showed that interest in socially responsible investing (SRI) is increasing rapidly, but investors are still asking if investing in an SRI strategy

  2. Regulatory - Ireland launches structure for passporting loan origination funds within EU[more]

    From Asiaasset.com: The Irish Funds Industry Association (IFIA) has introduced new loan origination capabilities that will offer Asian managers and investors a new structure under the European Union’s (EU’s) Alternative Investment Fund Managers Directive (AIFMD). The new structure will allow the mar

  3. Europe - Ed Miliband's war on hedge funds could damage City of London[more]

    From Telegraph.co.uk: Ed Miliband’s plans to wage war on hedge funds could be potentially more damaging to the City of London than even the financial transaction tax (FTT), senior banking sources warned on Tuesday night. The Leader of the Opposition took aim at a number of industries as part of his

  4. News Briefs - SEC probes Pimco ETF over pricing irregularities, BEPs: Action plan released and UK first to adopt country-by-country reporting[more]

    SEC probes Pimco ETF over pricing irregularities The Securities and Exchange Commission is investigating Pimco’s pricing of exchange traded funds, the latest cloud to hang over the world’s largest bond manager, which has been dogged by poor performance and management infighting. Pimco on

  5. CalPERS’ move might alter hedge fund fees for good[more]

    Benedicte Gravrand, Opalesque Geneva: When CalPERS, the California Public Employees’ Retirement System, announced on September 15th that it was unwinding its hedge-fund portfolio, it was seen by many as is a significant blow to the sector’s appeal. The Fund is