Goldman & Its $5.4bn Staff Pay Problem

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There's probably no good time to be charged with fraud by The Securities and Exchange Commission. But if there was ever a bad time - a really bad time - for Goldman Sachs, that time was last Friday.

On Tuesday, of course, Goldman releases its first-quarter earnings - which are expected to be huge. And The New York Post has reported that the firm is likely to have set aside some $5.4bn for staff compensation and benefits in the period (which averages out at around $170,000-a-head for just 3 months work).

One banker told Here Is The City: 'A bumper quarter with massive provisions for staff bonuses is the last thing Goldman probably needs now, when it's in the public eye, staring down the barrel at a fraud charge. The timing here stinks. It couldn't have been worse'.

In the meantime, Reuters reports that European politicians have been jumping on the bandwagon, with both UK Prime Minister Gordon Brown and a German government spokesperson confirming that they will be asking their respective securities regulators to launch an investigation into the Goldman affair. Regulators in Asia, however, are thought likely to remain on the sidelines until the mist clears.

Over in the US, without specifically mentioning the Goldman catalyst, Treasury Secretary Tim Geithner said that he now felt  'very confident that we're going to have the votes for a strong package of financial reforms'.

And, as if Goldman didn't have enough problems right now, Dow Jones Newswires has reported that the judge who has been assigned the firm's fraud case, Barbara S. Jones, took on the Mob when she was a prosecutor and presided over the trial that resulted in WorldCom CEO Bernie Ebbers being sent to prison for 25 years. It never rains......

Finally, The Wall Street Journal reports that The Securities and Exchange Commission is now actively seeking to examine other mortgage-related transactions, and is investigating whether fraud may have been committed by any other Wall Street firms. Another banker told Here Is The City: 'There's not one major bank where investors didn't lose out from mortgage-related deals during the financial crisis. And the SEC's actions have now given investors free rein to use lawyers and attempt to get some of those losses back. Executives at every large firm must be themselves'.

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