It's a great day for America's two most hated companies. First, we learn that BP may have stopped the leak in the Gulf, which sent its stock soaring. Traders were also busy buying the stock of Goldman Sachs late Thursday. The SEC has announced that it will settle its suit against the investment bank for $550 million.
SEC Enforcement Director Robert Khuzami says of the development:
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.
Right, or maybe it's a stark lesson not to make so much money during a deep recession that you're vilified into facing an very annoying lawsuit that could go on for a dozen years with appeals, even if you know you haven't broken any laws and ultimately win. There had to be some give on both sides here. The SEC must have known that its chances in court were precarious, as it could have got a lot more satisfaction and money if it beat Goldman formally. Goldman, however, probably figured $550 million was a fair price to put the episode behind it forever. After all, the bank can afford it.
It's interesting to note the timing of both the beginning and now the end of this case. Goldman was formally charged right around the time when the public was beginning to take interest in financial reform. The case made for the perfect narrative of an evil Wall Street firm that needed to be reined in with thoughtful regulation from Washington.
And when did the case end? The settlement was announced a few hours after Congress passed the financial reform bill, sealing the legislation's fate. So there's no longer any reason to make an example of Goldman. That's not to say there's necessarily a conspiracy at work. It could just be a coincidence, if you believe in that sort of thing.
At any rate, Goldman's stock is nearing $150 in after-hours trading, a level it hasn't seen since April. It started Thursday at $140. Now the bank can stop worrying about politics for a while and go back to doing what it does best: making gobs of money.