Weekend Update: Goldman Sachs Hid Troubles From Investors

Not exactly ideal image rehab:

The Times of London reported Monday that Goldman Sachs is doling out $5.3 billion in bonuses, amounting to roughly $167,783 per banker, with "with a handful of top traders expected to be in line for multi-million-[dollar] bonuses."

That's the cherry on top of a stunning, four-day meltdown at the white-shoe firm, which lost $12 billion in market value on Friday alone. Its troubles are rippling outward from the April 16 SEC complaint, which blindsided the Wall Street monolith. But claiming blindsidedness is looking a bit rich today: Goldman learned the SEC might bring action within the last six months, according to Reuters; they were first slapped with a related SEC subpoena in August 2008, per The Wall Street Journal. And The New York Times reports that the bank's top leaders knew and approved of the scheme from the time the housing market first went south. Prior to Friday's complaint, Goldman received a Wells Notice, the government's formal alert to firms that they could be sued. Companies are not required to disclose receipt of a Wells Notice to shareholders if the action involves less than 10 percent of a company's worth—and Goldman, sitting on more than $840 billion in estimated assets, was in the clear. Not that everybody's OK with their silence: alerting shareholders could've saved those investors serious money. Goldman isn't commenting on why they kept mum about the probe; allegedly, they felt the SEC's threat was too diffuse for an enforcement action. And this time, the SEC's customary courtesy call—one that would've alerted the bank of a civil suit prior to its public unveiling—never came.

The lack of a tipoff shows a mounting "combative streak" for the SEC, the Journal says. And while Goldman reels, with Prime Minister Gordon Brown slamming its "moral bankruptcy" and German authorities discussing an inquiry, the SEC is turning to other firms. Deals structured by Deutsche Bank, Merrill Lynch, UBS, and others are now under investigation, part of the SEC's rapidly expanding inquest into collateralized debt obligations that used subprime mortgages as collateral. Some analysts say the SEC's actions could be "setting the stage for another financial collapse," CNBC reports.

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