Goldman Sachs has agreed to pay $1.5 million to settle charges that it failed to supervise the activities of a former trader who in 2007 was able to amass an $8.3 billion trading position without detection.
The CFTC alleged that former Goldman trader Matthew Marshall Taylor entered fabricated futures trades into the company's manual trade entry system 60 times over seven days in November and December 2007, in an attempt to cover Goldman's true positions in S&P 500 futures contracts.
It should be noted that the head of the CFTC, Gary Gensler, is a former Goldman partner, who was recruited by Goldman right out of Wharton.
Although whether there is a need for a CFTC regulatory agency is, itself, a worthy discussion, it is interesting to note an objection to the settlement from one of the commissioners:
CFTC Commissioner Bart Chilton said the settlement did not go far enough.
Chilton dissented in part from the agreement and said the starting point for penalties should have been $7.8 million.Does this mean Goldman gets discounted penalties? I suspect so. Those on the island surrounded by the regulatory moat are protected people and organizations.