News Overload – SEC, BP and Dodd-Frank – who wins and why?

“Mark this down as a good day”, said President Obama on hearing the Wall Street reform bill had passed the Senate and the BP cap was looking good so far.  Who else had a good day, and who did not.

First, this column had a pretty good day – here was our call on SEC v Goldman when it began:

“The fact that Goldman is stuck defending some unpleasant positions does not mean that it will, or should, lose the case.  Normally  a tenable, but ugly, defense, suggests settlement.  Here, Goldman will not accept a resolution that includes culpability for fraud – even if the SEC imposed sanctions are palatable, the damage to its reputation won't be.  Unless.......maybe, at some point if and when the SEC is feeling shaky about its case, Goldman can hang Fab out to dry and cut a settlement deal in which the firm accepts failure to supervise but not culpability for fraud.”

Pretty close to the final outcome, with failure to disclose replacing failure to supervise. 

Goldman and the SEC both join the President in marking this as as a good day.  $550 million is palatable to Goldman.  It's enough so the SEC can claim victory and argue, credibly, that similar conduct will be deterred.  The civil result makes criminal action by the Justice Department on mortgage CDO's extremely unlikely.  The Goldman announcement suggests the SEC has had enough in this arena.  Private litigation may be expensive, it won't be life threatening for Goldman.  

Fabrice Tourre?  Not a good day.  Not a good day at all.  He's not included in the settlement and the fact that Goldman settled without him is probably making him extremely nervous.

The BP cap holding, so far, is a good day for – well pretty much everyone.  If this cap holds, is it a repeatable solution to a difficult, deep water blowout?  If yes, will the administration reconsider it's effort to impose a deep water drilling moratorium and focus on tougher regulation and back up planning - including a supply of caps like this, and the equipment it takes to install them, on standby, ready for use on short notice.

Wall Street reform, aka Dodd-Frank?  Democrats can  claim they did something, a good day of sorts.  Republicans Boehner and Chambliss are already calling for partial repeal, suggesting they don't think it's such a good day.  The financial community lobbied hard against some elements of this bill, but so many provisions call for studies and regulatory action that the full impact won't be known for years.  Too much for today's column, but definitely a good day for Homer Simpson,, Gordon Gekko and Henry David Thoreau.  They will have fodder for many panel discussions to come, not to mention the publicity boost that's just around the corner when Gordon's sequel finally opens.