RBS Prepares To Seek More Money Out Of Goldman

While the punditry debates whether the SEC settlement was or was not a win for Goldman (As Bloomberg's Jonathan Weil summarizes it best: "Here’s the real beauty of the SEC’s settlement agreement yesterday with Goldman Sachs. The next time Goldman Chief Executive Officer Lloyd Blankfein goes on television and is asked by some reporter if Goldman committed securities fraud, as the SEC alleged, he won’t be allowed to say no.") those wronged by Goldman are only just starting to flex their legal muscles. Reuters reports that one of the "big" winners from the settlement, UK's biggest nationalized bank RBS, is about to beg for more handouts (allegedly to cover its ongoing losses on sovereign debt holdings): "Royal Bank of Scotland may pursue Goldman Sachs for hundreds of millions of dollars to add to $100 million it got as part of a settlement over the marketing of a subprime mortgage product. RBS said on Friday it would "carefully consider all of its options" after Goldman agreed on Thursday to pay it $100 million as part of a $550 million settlement of civil fraud charges over how it marketed the subprime mortgage product. RBS's options include taking Goldman to court as the U.S. Securities and Exchange Commission said the penalty left the door open for future civil suits." At this point the response by RBS, which is 83% state owned will likely depend on US treatment of BP, considering that "Former UK Prime Minister Gordon Brown said in April that Goldman would have to pay back "hundreds of millions of dollars" if the charges against it were proven." The only question left is to define "does not admit or deny guilt."

Somewhat more ironically is that a major portfion of the restitution will go to a company, IKB, which went insolvent as part of its greedy stupidity to participate in precisely such deals. The winner will be acquiring company, Texas PE firm Lone Star:

RBS and IKB were the two of the biggest losers of both the controversial product marketed by Goldman and of the wider financial crisis. Each needed billions of euros in state bailouts to survive.

Edinburgh-based RBS paid Goldman $841 million in August 2008 to settle a claim on credit insurance provided by ABN AMRO, the Dutch bank of which RBS had bought parts months earlier.

IKB was brought to the brink of collapse in 2007 in part because of exposure to subprime-related products Goldman sold to IKB's off-balance-sheet investment vehicle Rhineland Funding.

IKB, which required multiple bailouts and is now majority owned by Lone Star, declined to comment before it had a chance to review the SEC settlement.

At least John Grayken, who renounced his US citizenship in 1999, will be happy.




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