All Eyes on Goldman

It's never easy being in the PR department of Goldman Sachs. The investment bank, the largest on earth, has been under fire since the earliest days of the financial collapse. Who can forget the infamous Senate hearing last spring, where Senator Carl Levin repeatedly invoked Goldman's own words in claiming that they were knowingly selling investors "a shitty deal?" Two months ago the Permanent Subcommittee on Investigations released its findings on the financial crash, Wall Street and the Financial Collapse: Anatomy of a Financial Collapse. In the nearly 700 page report, Goldman takes a leading role. The report chronicles how Goldman bet against the mortgage market while actively selling their investors securities that they suspected would decrease in value. To many this is to be a conflict of interest; to Senator Levin, a breach of the law.

In calling for Goldman's prosecution, Sen. Levin claims that, "In my judgment, Goldman clearly misled their clients and they misled congress." Citing Levin's report, Rolling Stone's Matt Taibbi, in his expose"The People vs. Goldman Sachs," has called for the Justice Department to step in. In the article, Taibbi interviews former New York Attorney General, Elliot Spitzer, who made a name for himself as the "Sheriff of Wall Street" by prosecuting Wall Street CEOs in the void left open by an inactive Federal Government. When asked what he would do if he were still Attorney General, Spitzer replied "once the steam stopped coming out of my ears, I'd be dropping so many subpoenas."

Despite such sentiment, the Federal Government has been loathe to act. Spitzer's words, however, did not fall on deaf ears in the Empire State. As reported in today's DealBook, the Manhattan District Attorney, Cyrus Vance, has issued subpoenas for Goldman, resulting from the Levin Report. To make matters worse for Goldman, this summons comes on the heels of an "exploratory meeting" with the New York Attorney General's Office which occurred only two weeks ago.

Turning our attention to the markets, after the story broke, shares in Goldman dropped down to $132.04 before stabilizing at $134.38. Despite its rally, Goldman ended the day down $1.79 from closing on Wednesday. Today's losses, although small, are indicative of a larger trend in Goldman recently. The firm's shares are down from $170 in January, and from $140.73 at the end of May. It appears the markets -- as well as the legal authorities -- have their eyes on Goldman Sachs.