Goldman Sachs Earns $3.46 Billion

Another day on Wall Street, and we’re still talking about Goldman Sachs (GS). To reiterate, I don’t think Goldman is a good buy right now.
Goldman is still doing what it does best—making ridiculous amounts of money. Earnings for the first quarter nearly doubled to $3.46 billion. That comes to $5.59 a share which creamed Wall Street’s estimate of $4.14 a share.
Goldman has always been a bit of a black box so the Street’s earnings estimates can be wildly off the mark. Still, this is a phenomenon ally wealthy firm. The firm’s conference call was dominated by questions about the SEC’s investigation.
I remain unimpressed by the SEC’s case against Goldman Sachs. This seems to be a very well-timed charge especially considering that financial reform has taken center stage in Washington. We also just learned that the SEC dragged its feet on the Allen Stanford case for over 10 years. Furthermore, the SEC vote on the Goldman charge was 3-to-2, so even folks in the government see how thin this case is.
Bloomberg says that the Goldman case may come down to what the meaning of the word “selected” is.

The Securities and Exchange Commission must prove that the most profitable company in Wall Street history defrauded investors by failing to disclose that a hedge-fund firm betting against them played a role in creating what they bought. It must also counter Goldman Sachs’s assertion that an independent asset manager, which the SEC said rejected more than half of the securities initially proposed by Paulson & Co. for a collateralized debt obligation, signed off on the selections.
“The question is whether Paulson’s undisclosed role in portfolio selection was material,” said Larry Ribstein, a law professor at the University of Illinois in Champaign who has written about 140 articles and 10 books on topics including securities law and professional ethics. “There’s no clear and well-defined definition of what you have to disclose in this type of transaction.”

So the 90s was about the definition of “is” and this decade is about the definition of “selected.” Not sure if we’ve improved.

Posted by on April 20th, 2010 at 10:34 am


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