1. This morning, Goldman Sachs held its quarterly earnings call and all the questions were about the SEC investigation. “You go to trial — which is what we’re doing — but you always have the option of settling,” is what Goldman said. In fact, they brought up settling so frequently that everyone’s pretty sure they’ll settle up and this’ll go away. And they’ll be using a lawyer with a great brand.
2. Their executive compensation percentage of income for the 1st quarter was the lowest ever. Their 1st quarter income was an impressive $3.3 billion (revenues were $12.78 billion).
3. Meanwhile, the Times, while still going whole-hog front page on the investigation, has developed an opinion! “The Securities and Exchange Commission has taken on a risky case as it tries to re-establish its credibility as an enforcer,” for one thing. Oh, it’s a risky case now? Yet one that gets A1 coverage for days on end, I suppose! (Though it is also true that we have no idea what the SEC knows; we have seen but a tiny bit of what they have gathered from a deep sift of company emails and the like.) Interestingly, the Times refers to Goldman’s “sterling reputation”-a very different characterization of the firm coming from them!
4. Elsewhere, Felix Salmon characterizes the SEC as “a comatose beast run by supine Republicans”-one now desperate to take some action in light of America’s anti-bank rage.
5. In London, pretty much every party is up in arms about Goldman’s status as an adviser on debt issuance-and their SEC, the FSA, is “investigating” something or other.
5.5 There’s an undercurrent in all these conversations, sort of led by Goldman’s conference call, that what people who work in markets do is not “betting.” The popular convention to explain the SEC lawsuit is to say “Well Goldman was selling things that they were also betting against.” And Goldman’s point is that they don’t “bet,” which sounds like splitting hairs but is actually not a terrible point about how transactions are constructed. (They are constructed with “math.”) For those who’d like to hear Goldman’s defense, their response documents are here.
6. Speaking of “betting,” here is a rather excellent explanatory self-conversation here about Goldman, the SEC, Magnetar and branding. If you look at much of the writing about and even the investigations of banks as being about branding and brand management, things make more sense. Much of the risk to Goldman with the SEC investigation is “reputational,” not financial, although they are tied. And in many ways, this is a struggle of brands: “The same way the Obamas and the Kardashians and Apple are all brands, Goldman Sachs is a brand…. Then writer Matt Taibbi — who is employed by Jann Wenner, one of the decade’s wealthiest profiteers of the side game of keeping the public doped up on celebrity ephemera — found himself charged with the unenviable task of explaining the financial crisis to people who would rather be reading about Lady Gaga, and did the only thing he could in such a position: He eviscerated the Goldman Sachs brand…. The SEC has a terrible brand. If Toyota’s braking system department had its own brand, the SEC’s would still look worse.”