Audit Notes: The SEC Lets Goldman Off Easy

So Goldman Sachs (an Audit funder) gets off the hook with a $550 million fine and with no apology.

But $550 million is a lot of money, you say. Well, maybe. That depends on the context.

For that we turn to Footnoted’s Theo Francis:

Goldman had $27 billion in cash and short-term securities on March 31, according to its latest 10-Q. That means the settlement, at barely 2% of the total, is in fact pocket change for the company.

And Francis notes that the fine is one-tenth what it paid its bankers in the first quarter alone.

The upshot?

All told, not terribly impressive. But there’s also the SEC’s perspective. Obama asked Congress for $1.26 billion to fund the agency for fiscal 2011, an increase of about $139 million over fiscal 2010 — and just barely double what Goldman will shell out without breaking a sweat. This speaks volumes about the resources available to Wall Street’s beat cops.

So from the SEC’s perspective, Khuzami hooked a whale. From Goldman’s, it’s more like a minnow.

— Felix Salmon just about sums it up with his headline, “Goldman agrees to carry on as usual.”

My favorite part of the SEC settlement with Goldman Sachs is the bit where Goldman agrees to “a permanent injunction from violations of Section 17(a) of the Securities Act of 1933″. Well, that’s reassuring, knowing that from now on Goldman has promised not to break the law. Goldman has also consented to an agreement that when it puts together new mortgage securities, it’ll run any prospectuses or term sheets by its legal or compliance departments. As if it wasn’t doing that already. And there’s lots more like that: people on the mortgage desk have to attend training seminars on disclosure! Goldman “shall provide for appropriate record keeping”! And so on and so forth.

— The settlement is also, as I wrote in April “a big loss for the public’s right to know what Goldman did.”

David Weidner of Marketwatch is on that track, too

Without stronger penalties, without a revealing release of details, cross-examination and court scrutiny, why would any client even consider dumping this firm?

The settlement doesn’t force Goldman to do anything different. It’s substance-less, and a real cave by the SEC. Here’s Weidner:

For the regulators, the settlement is more than just anticlimactic. Having bet all of its chips on reversing embarrassing episodes such as the Bernie Madoff fiasco in an aggressive case against Wall Street, the SEC whiffed.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.