Morning Scan

Goldman to pay $3 billion to settle 1MDB charges; HUD rule challenged

Register now

Breaking News This Morning...

Barclays rebounds

Barclays reported third quarter earnings of £611 million, or $799 million, “after losing £292 million in the same period last year, when it took a one-off charge. CEO Jes Staley sounded a cautiously optimistic note about the U.K. bank’s prospects of rebounding from the coronavirus pandemic,” the Wall Street Journal reported.

The bank “reported a big drop in provisions for bad loans in the third quarter as the initial economic shock from coronavirus subsided, while revenue at its trading arm continued to surge in turbulent markets, driving better than expected profits,” the Financial Times said. “The U.K. bank took £608 million of credit impairment charges in the three months. Although that was about a third higher than the same period last year, it was well below the £3.7 billion set aside in the first half of 2020 and less than the £1 billion that analysts had forecast.”

Receiving Wide Coverage ...

Black eye

Goldman Sachs Thursday “admitted it broke U.S. corruption laws, agreed to pay billions of dollars to global regulators and financially punished its top executives, resolving one of the biggest scandals in Wall Street history,” the Wall Street Journal said. “Goldman took $174 million in compensation from executives” – including current CEO David Solomon and his predecessor, Lloyd Blankfein – “and agreed to pay nearly $3 billion to officials in four countries to end a years-long investigation into its dealings with a Malaysian investment fund at the heart of a global bribery ring. Its check to the U.S. government is the largest such fine ever paid.”

“All told, Goldman’s dealings with the fund, known as 1MDB, will cost it more than $5 billion in financial penalties and a reputational black eye. The fund launched a decade ago with grand plans to jump-start the Malaysian economy, but instead, prosecutors say, it became a piggy bank for government officials, investment bankers and an international cast of high-rolling hangers-on.”

Goldman’s Malaysia unit “pleaded guilty to violating the Foreign Corrupt Practices Act, which bars U.S. companies from paying bribes to government officials abroad,” the Journal said.

“The deal with regulators is the first criminal settlement in Goldman’s history as a public company,” the Financial Times said.

“As part of the settlements, Goldman agreed to continue overhauling its compliance and oversight functions. The reforms appeared to give the compliance functions and others within the firm greater power to vet risky deals.”

“Goldman Sachs played a starring role in the dubious financial engineering that helped spark a global financial crisis last decade, and its 151-year history is dotted with scandals that ended in fines or governmental scoldings. But never before has it had to go before a U.S. judge and admit it was guilty of a crime,” the New York Times said, making it “the worst black eye in Goldman’s long history.”

“The U.S. is home to many of the world’s preeminent financial institutions. Today’s charges and guilty pleas show the Department of Justice will not hesitate to hold them accountable for harm that they caused here and abroad,” Acting Assistant Attorney General Brian Rabbitt said, the Washington Post reported.

As part of the settlement, regulators in the U.K. fined Goldman Sachs International £96.6 million ($126 million), Reuters reported. “There is no amnesty for firms that tackle financial crime poorly, and the size of GSI’s fine reflects that,” said Mark Steward, executive director of enforcement and market oversight at Britain’s Financial Conduct Authority.

Washington Post

HUD challenged

Civil rights groups on Thursday “filed a pair of lawsuits against the U.S. Department of Housing and Urban Development and HUD Secretary Ben Carson for weakening an Obama-era rule meant to keep lenders, landlords and insurers from discriminating.” The suits challenge a new rule finalized last month “that housing advocates say would make it harder to prove such forms of bias.”

“The lawsuit filed by the National Fair Housing Alliance and other plaintiffs argued that the new law would embolden the housing industry to continue existing discriminatory practices or implement new ones.” But HUD spokesman Brad Bishop said, “The suits ignore the plain text of controlling Supreme Court precedent and well-established doctrine of administrative law – welcome to 2020.”

Elsewhere

Ready for mainstream?

PayPal’s announcement Wednesday that it will allow customers to use bitcoin and other digital currencies to make purchases at online retailers isn’t “a watershed moment for cryptocurrencies becoming a widespread means of payment,” Reuters said. “The move might do little to drag existing cryptocurrencies out of their niche in payments, according to many fintech specialists, as holders of such coins often view them as an investment asset akin to gold rather than as a means of spending.”

But the move “could help the company attract new users in an increasingly competitive digital payments landscape where innovation is king, the experts said.”

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER