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The Math Behind the Goldman Sachs Settlement

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ProPublica's Marian Wang writes:

"Goldman Sachs has agreed to pay $550 million to settle the SEC's civil fraud lawsuit against it. The SEC is touting the sum as the “largest-ever penalty paid by a Wall Street firm,” but how much does the settlement actually hurt Goldman?"

A couple of key points from the piece:

It’s about two weeks’ worth of profit.

Goldman reported earning $3.3 billion in the first quarter of 2010. That’s about $250 million in profit per week.

It's less then a tenth of the gain Goldman's stock had today.

Goldman’s stock took a hit when the SEC announced its lawsuit in April, but since word of the settlement first started circulating today, it’s added back $7.9 billion dollars to its market cap.

It’s a sum that Goldman could pay immediately (and probably a hundreds of times over).

The company’s average global core excess liquidity—the average worth of assets it could readily convert into cash—was $162 billion for the first quarter of 2010.

Good going, SEC! You really nailed 'em this time! That means Goldman's ~$20 billion bonus pool could be slashed to a paltry $19.45 billion.

Let the world's smallest violin begin to play.
POSITION:  No positions in stocks mentioned.