The Winners And Losers In The Goldman Sachs Fraud Case Settlement

Goldman Sachs (GS) took the stand months ago as the government’s financial crisis investigation committee grilled the company over its role in the Great Recession.

A host of questions were asked about the SEC civil charges against the firm, and some people came out looking better than others.

Now everything’s changed. The SEC just announced that it will settle with Goldman for $550 million.

The jury is still out on Fabrice. He could still be charged with fraud.

This means either one of two things happened.

1. Goldman was not able to get the SEC to change the language in Fabrice's fraud charge. So they hung Fabrice out to dry.

2. Fabrice didn't want to settle and is fighting the charges.

This case has got to be really tough for Fabrice. His emails were taken largely out of context and his ex-girlfriends were brought into this.

Winner: Josh Birnbaum, Managing Director of Goldman's Structured Products Group Trading

Huge win for Josh Birnbaum.

Of the four men in the first panel, Josh Birnbaum speech was the least scripted. He was also able to complete more than one sentence in a few answers, something only Blankfein and he seemed able to accomplish.

Winner: Goldman Sachs CFO David Viniar

Viniar hits it out of the park.

Mr. Viniar was leaps and bounds superior to any other Goldman witness. All the time composed and competent, Viniar presented his opinions with polish and truth, something that could not be said for the day's earliest testimony.

Viniar went back repeatedly explaining why shorts where not bad, or illegal, to Senator Levin. He also clarified that Goldman Sachs would not have money from AIG, if it was not for government decision making. Finally, he knew when to apologise, noting calling a security 'shitty' via e-mail was not a wise choice, and that the role of the ratings agencies would be one worthy of investigation.

Loser: Goldman Sachs Chief Risk Officer Craig Broderick

Broderick got lucky.

Mr. Broderick barely spoke during his testimony before the investigative committee, but when he did he looked skittish and under-confident next to his colleague Mr. Viniar. Although, any other Goldman Sachs witness would have looked that way next to the competent David Viniar.

Broderick defended Goldman's position in the subprime market, but did so quite shabbily compared to Viniar. Surely in the corporate pecking order at Goldman, Broderick slid behind Viniar, if he wasn't there already.

Photo: Risk.net

Winner: Senator Levin

At times Senator Levin appeared overbearing. At times he seemed out of touch with the issues. But, throughout 10 hours of extensive questioning, he always remained focused on his goal: naming and shaming Goldman Sachs for their role in the financial crisis.

The SEC gets to say they had a huge win - a record-setting settlement - and it's largely because of Levin.

Winner: Senator Claire McCaskill

Senator McCaskill wielded the day's best analogy during the case, going on a long-winded explanation of how a bookie was no different than a CDO dealmaker. She showed us a thing or two about betting in general, and found a way to communicate her point, that banks like Goldman Sachs are simply betting agencies, better than many of her counterparties.

This is a big win for her, too.

Winner: Michael Swenson, Managing Director of Goldman's Structured Products Group Trading

Swenson did his job and comes out on top.

Michael Swenson gave a solid performance, probably because he blended into the background and got the least attention of everyone in the first panel.

Swenson admitted the firm had a good year and appeared remorseful for it, gaining sympathy points from the audience.

He was unassuming while answering the Senator's questions clearly and insisted there was constant debate about which position the company should take on housing.

Loser: Dan Sparks

Sparks was carried to victory by his comrades.

Dan Sparks appeared inconvenienced by the hearing. He played dumb and pissed off the Senators and everyone watching.

Whenever Senator Levin referenced an email, Sparks asked Levin to find the email he was referring to. It took up ridiculous amounts of time and made the Senator's blood boil.

Luckily for him, Levin and another Senator made sniding remarks about his 'refusal' to answer questions and took some of the negative attention away from Sparks.

Winner: Goldman Sachs

Goldman just settled for chump change. $550 million is nothing to them.

They're winners because they got the SEC to change the SEC charges from fraud to a mere omitting of key information.

So they got rid of the fraud charges completely. Huge.

Winner: Lloyd Blankfein

Blankfein just got his firm out of a huge scandal. They did not admit to any (major) wrongdoing.

The fraud charges were dropped - and all Goldman admitted to is omitting key information.

As part of the settlement, it was announced that Blankfein would stay on. Like he got a gold star for the SEC. Monstrously huge.

Winner: Mary Schapiro and the SEC

Huge win for the SEC - a record-setting settlement of $550 million.

Goldman didn't win the case, they had to settle. Sure it's for less than the $1 billion we thought it would be, but this is still a monster case for the SEC.

More importantly, other banks are scared of going through what Goldman went through. That makes this a definite win for the SEC and Mary Shapiro.

Winner: Obama Administration

President Obama's financial reform push got a lot of attention today.

First the Financial Reform bill passed the Senate and now this. Win for Obama.

Loser: John Paulson

Paulson looks bad because Goldman wasn't able to get rid of the charge that they omitted key information, namely, that he was betting against the securities he was structuring. He's the bad guy.

He structured the ABACUS deal to his liking and his name is getting slammed in the press. And then there was even talk of an all-girls private school, Spence, kicking him off their board.

Winner: RBS ABN Amro

ABN Amro bought ABACUS and lost when the mortgage bonds inside went bad (because the borrowers were unable to pay). Everyone acknowledged at first that it was ABN's fault for buying something crappy in the first place.

But now it looks like less their fault because Goldman admitted to omitting key information in the ABACUS marketing documents.

Winner: German Commercial Bank IKB

IKB is in a similar position to ABN. They were invested in ABACUS.

Essentially, IKB went long $150 million in ABACUS based on not all of the information available to Tourre. They might have a case against Goldman.

Everyone acknowledged at first blamed IKB for buying something crappy.

But now they're forgiven because Goldman admitted to omitting key information in the ABACUS marketing documents.

Loser: Anti-Regulation Republicans

The Republican Party's movement against financial reform looks a likely loser in the fallout because the SEC just won a record-breaking settlement.

Now you should check out the 10 questions the Senators should have asked

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