This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

FinReg in the Bag, Goldman Goes Free

Updated with additional commentary on Khuzami quotes.

NEW YORK ( TheStreet)--Talk about coincidences!

In case anyone retained any shred of doubt that the Securities and Exchange Commission's civil fraud case against Goldman Sachs (GS - Get Report) was politically motivated, Thursday's events have laid those doubts to rest.

We now have a startling double coincidence linking politics and the SEC's case against Goldman. First, on April 16, the SEC happened to announce its Goldman case just hours before President Obama gave an important speech launching his push for financial reform legislation.

On Friday, just as Congress passes that same legislation, known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC announces it is settling with Goldman.

As I have stated in the past, I don't believe President Obama is vindictive by nature. It seemed that once he had his reform bill, he would let Goldman go, which is why, when The Wall Street Journal reported Thursday that settlement discussions were underway, I took things a step further, calling it a done deal.

The Journal story raised a whole bunch of issues that sounded like they could be serious obstacles to a deal. For example, Goldman wanted to limit its liability, but the SEC wanted to be able to go after Goldman if the agency found "new evidence of wrongdoing." The SEC also had to reach a tough enough settlement that a judge wouldn't dispute it, as Jed Rakoff did with Bank of America (BAC - Get Report) last year.

These and other obstacles seemingly melted away, however, once the political will was there to do a deal.

But SEC enforcement chief Robert Khuzami insists the case is not about politics.

"I can personally vouch for the fact that the investigations we undertake, the cases we bring, when we bring them and the timing of them has nothing to do with external events. There's lots of process and lots of steps [that have] to take place before such a matter is brought, and frankly, even if you were so inclined you wouldn't have the ability to engage in the coordination that's been suggested," he told CNBC Friday morning.

And if you believe that, I have a super safe new collateralized debt obligation called Abacus XIII I'd like to sell you.

More charges may come for other banks. There have been reports that Morgan Stanley (MS - Get Report), Citigroup (C - Get Report), and Bank of America, as well as a few European banks, are being probed by the SEC.

But investors in those firms now have a number they can work with -- $550 million -- in trying to gauge the cost of a settlement, should charges ever be brought.

Bank stocks have sold off mightily since the fraud charges were announced against Goldman three months ago. Now they appear poised for a big rally. Washington may not be done beating up on the big banks themselves, but it's probably a bet worth making that the very worst of the political storm has passed for investors in their stocks.
More on Goldman Sachs
Volcker Rule's Impact on Goldman

-- Written by Dan Freed in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $14.57 0.07%
C $46.17 -0.24%
GS $166.18 1.26%
JPM $63.79 0.93%
MS $27.26 0.74%


Chart of I:DJI
DOW 17,891.16 +117.52 0.66%
S&P 500 2,081.43 +16.13 0.78%
NASDAQ 4,817.5940 +42.2360 0.88%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs