Here are two articles of note that I have come across regarding the SEC investigation of Goldman Sachs.
First, from Darren Stubing in Emirates Business 24/7:
Goldman to trigger an avalanche
The timing of Goldman’s results couldn’t come at a worse time.
Litigation will be complex and lengthy. However, what is clearer is that there will be many more investigations involving the sub-prime market and other financial transactions with more cases expected. The focus on tightening the supervision of banks and the financial markets will continue and the onus which will fall on financial institutions to be prudent, fair and highly transparent. The derivatives market will receive particular focus from market supervisors in a quest to bring more transparency and exposure understanding. The big drive is to unravel the complexity of trading products and positions. Although the restriction on complexity may dampen the capacity for unbridled profit, the increased clarity on products can only be a good thing…
Also, from By Walter Hamilton and Nathaniel Popper in the Los Angeles Times:
Goldman Sachs case has makings of an epic legal showdown
The civil fraud charges filed by government regulators last week against Goldman Sachs Group Inc. have put the investment bank and the Securities and Exchange Commission on opposite sides of a case that has all the makings of an epic legal showdown.
But the adversaries share one thing in common — each is scrambling for its reputation.
Goldman is trying to protect its standing among clients, who could be frightened away by any evidence that the company is cheating them.
The SEC is hoping to buff its tarnished image as the regulator that couldn’t catch Bernard L. Madoff, despite a whistle-blower and other evidence that the financier was running a massive Ponzi scheme that swindled billions from investors.
“This is a risky battle for both sides,” said Jill Fisch, a securities law professor at the University of Pennsylvania. “This is the test case for the financial crisis…”
It will be interesting to see how this plays out. Either way, it looks like a lot of litigation is on its way.
