Under the proposed settlement, Goldman would repay the $ 15 million in profit it made from the Abacus deal and also pay a civil fine of $ 535 million. The money would be returned to the two banks that suffered losses on the transaction ?? $ 150 million to IKB Deutsche Industriebank and $ 100 million to the Royal Bank of Scotland group ?? with the remainder, $ 300 million, going to the US Treasury as a fine.
Goldman’s regulations require it to make changes to the way it reviews and approves offers for certain mortgage-backed securities.
Cornelius K. Hurley, director of the Morin Center for Banking and Financial Law at Boston University and a former attorney for the Federal Reserve, said the dollar amount would not alleviate public anger at the banks.
“You have to consider the symbolism of the SEC case. When it was tabled in April, it completely changed the dynamics on Capitol Hill, ”said Mr. Hurley. “Now comes the settlement and it’s $ 550 million. Well, two weeks ago we were talking about a $ 19 billion tax on companies like Goldman. The public wanted to either see more financial pain or have a lawsuit. “
Goldman wasn’t the only Wall Street firm creating complex mortgage-backed securities that allowed investors to place negative bets, and the commission continues to review other transactions across the industry.
Fabrice P. Tourre, the vice chairman of Goldman who was named in the SEC case, was not included in the settlement.
Mr. Tourre took leave of Goldman after the case was filed. When he appeared before a Senate committee in April, he said he should have highlighted Mr. Paulson’s involvement in Abacus in marketing materials for the deal. Mr Tourre’s lawyer did not respond to a phone call asking for comment on Thursday.
Goldman’s settlement would be more than the $ 400 million mortgage giant Fannie Mae, accused of inflating its income while lavishing bonuses on executives, agreed to pay in 2006, but lower than the $ 750 million the telecommunications company WorldCom was ordered to pay in 2003. after an accounting scandal. Fannie Mae was taken over by the government in 2008, and WorldCom, after coming out of bankruptcy, eventually became part of Verizon.