Goldman Sachs & SEC In Settlement Talks; Silver Lining?

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Goldman & SEC Reportedly Talking Settlement


Goldman Sachs Group Inc.'s lawyers are in talks with representatives of the U.S. Securities and Exchange Commission to settle the fraud charges brought against it by the regulator, the Wall Street Journal said, citing people familiar with the situation.

Goldman's co-general counsel Gregory Palm, along with other lawyers and SEC officials participated in the preliminary discussion, the paper said, adding that the talks did not include any terms, such as the amount of fine or agreements Goldman could make with the agency.

On Friday, Goldman Sachs Group Chief Executive Officer Lloyd Blankfein called for the besieged company to undertake a "rigorous self-examination" at the annual shareholder meeting.

"There is no bigger priority for our board of directors and management than to undertake a comprehensive review of all of our business practices," Blankfein told shareholders.

Goldman will establish a business standards committee that will report suggestions to management on standards and transparency, he said.

The committee, which Blankfein first broached during U.S. Senate hearings last week but explained in more detail on Friday, is the latest sign that Goldman is responding to the concerns of regulators and the public backlash facing the firm.

Goldman, Wall Street's dominant investment bank, is facing fraud charges from the SEC, which has accused the bank of failing to tell investors that the securities underlying risky debt tied to subprime mortgages were chosen by a short-seller, John Paulson, whose fund was betting the securities would lose value.

Goldman has drawn the attention of a Senate subcommittee and is facing shareholder lawsuits. It also is facing a Justice Department criminal investigation, sources previously told Reuters.

Silver lining?

Blankfein, who testified before a U.S. Senate subcommittee last week, said Friday that it "was not the most comfortable moment in my life."

Blankfein said lawmakers in Washington asked that Goldman return to help assess the impact of financial regulation. Goldman has a "duty" to explain the ramifications, he said.

For the past year, Goldman has faced a backlash over its quick rebound from the financial crisis and its bonus pool, which topped $16 billion last year.

The Rev. Jesse Jackson raised some of those criticisms on Friday, expressing concerns about Goldman's success while others struggled.

Blankfein, who said late last year he was "doing God's work," made an effort to demonstrate humility Friday.

"There is no future for Goldman, certainly no success for Goldman Sachs, unless the economy as a whole grows, and the economy grows in a way in which it doesn't create a wider divergence," he told Jackson. "If there is a silver lining, it certainly affords us an opportunity to be introspective."

Goldman shares turned positive on Friday, rising 1.2 percent to $144.03 in midday trading. They were the top performer in the Amex Securities Broker/Dealer Index.

Silver lining?
Blankfein, who testified before a U.S. Senate subcommittee last week, said Friday that it "was not the most comfortable moment in my life."

Blankfein said lawmakers in Washington asked that Goldman return to help assess the impact of financial regulation. Goldman has a "duty" to explain the ramifications, he said.

For the past year, Goldman has faced a backlash over its quick rebound from the financial crisis and its bonus pool, which topped $16 billion last year.

The Rev. Jesse Jackson raised some of those criticisms on Friday, expressing concerns about Goldman's success while others struggled.

Blankfein, who said late last year he was "doing God's work," made an effort to demonstrate humility Friday.

"There is no future for Goldman, certainly no success for Goldman Sachs, unless the economy as a whole grows, and the economy grows in a way in which it doesn't create a wider divergence," he told Jackson. "If there is a silver lining, it certainly affords us an opportunity to be introspective."

Goldman shares turned positive on Friday, rising 1.2 percent to $144.03 in midday trading. They were the top performer in the Amex Securities Broker/Dealer Index.

Calls for Blankfein's Resignation

Some have speculated that Blankfein might not be able to keep his job through the struggles facing the firm, but he did not offer any indication Friday that he would step aside.

Longtime corporate gadfly Evelyn Y. Davis kicked off the question and answer session by calling for Blankfein's voluntary resignation — and setting a deadline of Monday.

"I have no current plan to step down Monday," answered Blankfein, cracking a smile.

Davis persisted, later asking Blankfein, "If you won't resign by Monday, how about by the end of the month?"

Blankfein again retorted, "I have no intention of doing that right now."

One shareholder from Yonkers received loud applause when he expressed his support for Blankfein.

Shareholders backed the company's nominations for directors and a proposal for an advisory vote on pay. They defeated a proposal by The Maryknoll Sisters of St. Dominic relating to the use of collateral in derivatives trading.

Shareholders defeated a proposal urging the company to separate the roles of chairman and CEO. Goldman's board has recommended a vote against that proposal.

Blankfein, who is also chairman, said at the meeting that splitting the chairman and CEO roles would undercut the board's judgment.

"Our bylaws and our policy don't require that the chairman and CEO be in one office," he said. "It is the judgment of the board."


Sources: CNBC, Reuters