NEW YORK (
) -- All the talk and reporting around
seems to assume the firm will eventually settle
charges brought against it by the
Securities and Exchange Commission
, but Dick Bove, the iconoclastic analyst at Rochdale Securities, doesn't think so.
"The longer this takes, the more likely it is that this thing is going to go to court and I'm still convinced the SEC doesn't have a case," Bove said in an interview. He argues the government never wins high-profile cases against companies that go to court.
"They're just fortunate that these companies cave before they go to court because they can't take the pressure, but if the government simply asks for too much then it goes to court," Bove continued.
Bove believes the SEC wants management changes, a large fine, and a wholesale change in how Goldman conducts its business. This last part simply goes too far, Bove argues. He believes what the SEC is asking for would effectively make it impossible for investment banks like Goldman,
Bank of America
to raise money for companies, because they would effectively have to guarantee any investment they sold.
That is at odds with the very foundation of the securities laws, Bove argues. He says those laws prohibit firms from recommending securities they underwrite. Drawing upon recent
involving Goldman, Bove argues the Senate committee that held the hearing gave Goldman the exact opposite message.
"This committee is saying 'you have an obligation not to sell something that you think is crap.' Well, that's not in the law," Bove says.
If it were, it would be impossible for risky companies, such as those in the biotech sector, to ever get to square one, according to the analyst.
>>Video: Goldman Lawsuit a Buying Opportunity
"This is a buyers beware business, and the Senate seems to want to make it into a seller-is-at-risk business," he says.
Bove's comments that a settlement is not close appear to find some support from recent news reports. Last week, for example, Goldman President Gary Cohn said there is "no indication" Goldman is close to a settlement,
. On Wednesday,
The Wall Street Journal
reported that though lawyers for Goldman had met face-to-face with SEC investigators since the suit was filed, the two sides aren't close to a settlement.
As further evidence the sides are far apart, Bove pointed to the
report last week that the SEC is making headway in a separate case against Goldman related to a second security.
That report drove down Goldman's stock, a tumble from which it still has not recovered relative to other large banks like Bank of America and Citigroup. From the time the report came out Thursday morning through Wednesday's close, Goldman shares trailed those of Citigroup, Bank of America, JPMorgan Chase,
and Morgan Stanley. The selloff appeared to be driven by fears a
could be costlier than many had expected.
Bove called the leak "just another attempt to manipulate the press to use intimidation to force Goldman to give them a lot of money -- and it's not working."
Despite the fact that Bove believes Goldman will fight and win its case with the SEC, he continues to believe Goldman should get rid of CEO Lloyd Blankfein.
Though Bove believes Blankfein "really knows what he's doing in running the business," he lacks a "broader view" -- a deficit that has hurt Goldman's public image and brought it into its nasty battle with the government, the analyst argues.
>>Video: Goldman Settlement Will Pop Stock
Written by Dan Freed in New York