Is Lloyd Blankfein finally in hot water? The Goldman Sachs CEO has been implicated in his bank's controversial Abacus investments, which are at the center of an SEC civil suit. The SEC alleges that Goldman knowingly built a mortgage investment that was doomed to fail and sold it to oblivious investors. As it stands, Goldman employee Fabrice Tourre is the only person named on the SEC suit. But The New York Times reports that senior executives, including Blankfein, were intimately aware of the mortgage investment. What could this lead to?
- Hard to Say, writes Scarecrow at Fire Dog Lake: "What’s interesting is that top Goldman Sachs executives made a corporate-wide decision in late 2006 to move from positive to negative — to short the housing securities market — and to oversee the switch from the top of Goldman Sachs, before the Abacus deals were finalized and well in advance of the time when Mr. Tourre was putting together the Abacus deal the SEC alleges involved fraud."
- Let's See How This Plays Out, writes George Washington at Naked Capitalism: "The SEC’s fraud action against Goldman Sachs is really small potatoes. It alleges only civil – not criminal – fraud. And it is against only one small player, not against his bosses or top management... But Goldman has suffered a crack in its veneer of respectability. More importantly, the SEC action may represent a crack in the company’s armor. Before the SEC announced the charges, Goldman seemed unstoppable. It seemed like even countless tons of water pressure or scores of invading armies could not touch Goldman. Now, there is a crack…"
- No Higher Ups Will Be Affected, sighs Tyler Durden at Zero Hedge: "If anybody thinks that Goldman will be impacted by anything more than a $5 million settlement fee as a result of today's festivities, they are sorely mistaken. After all, don't forget just who the 29 year old COO of the SEC is."
- Keep Your Eyes on Fabrice Tourre Now, writes Henry Blodget at Business Insider:
It would be dumb for Goldman to fire Tourre, because then he would have every incentive to turn against the firm and drag other executives down with him. Firing Tourre would also make Goldman look guilty (right now, the firm's position is that it did nothing wrong--so if no one did anything wrong, why would they fire him?)
Similarly, it would be dumb for Goldman to fully embrace Tourre and insist that he did nothing wrong. ... In any event, Fabrice Tourre is now in an interesting position: Goldman is still associating with him, but they're doing it at arms-length, thus preserving maximum flexibility.