Where did the government get the legal power to do such a thing? If it is not legal, it is pure confiscation!
I suspect they’re looking to say - give us $2-3 billion or we’re coming and knocking on your door. More like extortion.
The Securities Exchange Act of 1934, that’s where.
Goldman sold a security without disclosure of material information to buyers of the security. It’s a pretty clear-cut violation of the securities law.
There is now a shareholder lawsuit that was announced yesterday against Goldman, because the SEC told Goldman it was investigating these issues with a “Wells Notice” some eight months ago. Goldman never made the Wells Notice public. They don’t have to unless there would be a 10% or greater loss to shareholders. Well, when the SEC announced the suit, GS’s price fell by more than 10%. Turns out Goldman would be much better off if they had announced the Wells Notice.
Between the SEC’s suit, the shareholder suit, the FSA in Britain opening up an investigation and perhaps the Germans opening up a full investigation - Goldman’s goose is cooked unless they can settle this case as quickly as possible, “without admission of wrongdoing” - just to get it off the table and prevent more lawsuits and investigations from being started.