HedgeFundLIVE.com — This story seems to never end. I’m sitting at home on Wednesday night enjoying my evening when I receive a phone call alerting me to the fact that Goldman is in trouble again. Specifically, Michigan Democratic Senator Carl Levin of “Shitty Shitty Shitty” fame, newly emboldened by the completion of his two year bipartisan investigation into the financial crisis, is on the verge of referring Goldman officials and possibly officials from other firms to the DOJ for possible prosecution and to the SEC for possible civil proceedings. From one of the articles covering the story:
The chairman of the U.S. Senate’s investigative subcommittee said he believes Goldman Sachs officials made misleading statements about their trading during the financial crisis and should be investigated criminally.
Sen. Carl Levin (D-Mich.) said on Wednesday that he plans to refer Goldman officials, and potentially officials from other organisations, to the Justice Department for possible prosecution and to the Securities and Exchange Commission for possible civil proceedings.
“In my judgment, Goldman clearly misled their clients and they misled the Congress,” said Levin, the chairman of the Senate Permanent Subcommittee on Investigations.
Levin’s statement came after a two-year, bipartisan investigation by his subcommittee. In one widely covered hearing in April 2010, as part of the investigation, senators sparred with Goldman officials over a mortgage-related product that a Goldman executive had referred to in an e-mail as a “shitty deal.”
Now, you may be thinking, “didn’t this already happen…?” Well, sort of. It was about one year ago, that Mary Shapiro and her band of merry regulators filed the Abacus complaint against Goldman and the fabulous Fabrice Tourre which was followed shortly by the Senate hearings where Sen. Carl Levin uttered his now famously descriptive adjective when referring to the “shitty deal” done by GS. Within a few short days after that very hearing, the DOJ announced that it had opened a probe into Goldman, which, according to the Manhattan US Attorney’s office, by that point had been going on for weeks. The announcement of the DOJ criminal probe took GS stock down by around 9.4% or $15 per share that day… OUCH!
The new information out on Wednesday is very similar but just a bit more specific. The DOJ probe from last year was very broad and seemed like a fishing expedition that was politically-driven. As a matter of fact, I still to this day don’t know what happened to that probe. It just seemed to fade away. Goldman has a mastery of making bad things go away. Anyway, regarding the current situation, Sen. Levin has said he plans to refer Goldman officials, which in my mind must include CEO Lloyd Blankfein and Mortgage head Daniel Sparks among others, to the DOJ for misleading investors and possibly lying to Congress. Sen. Levin appears to have very specific and damning information. Enough to actually give him enough confidence to refer the case. According to the Wall Street Journal article:
“Sen. Carl Levin, D-Mich., said Wednesday the subcommittee has found new evidence that shows Goldman’s misleading of investors went beyond that one case. He raised doubts about the testimony given last year by a half-dozen Goldman executives. Goldman CEO Lloyd Blankfein was among those who testified.”
“I believe they misled the Congress,” Levin told reporters. Goldman “gained at the expense of their clients and they used abusive practices to do it,” he said.
So what’s the difference between now and a year ago. Well, a year ago, Sen. Levin had the following to say:
“It’s not really up to us to get into whether there should be criminal indictments or SEC actions. Our role is an oversight role and to help inform the legislative process, so I really do not get involved in the question of criminal actions.
There may or may not be a reference from us to the Justice Department or the SEC, but I don’t know whether that’s going to happen yet. It won’t, until the dust settles a little and we can analyse the record and the transcripts and look for very specific questions that may or may not lead to a reference.”
So a year ago he was non-committal and now he’s a fire breathing Goldman-eating dragon about to blow through 200 West Street. What does this all mean for Goldman’s stock price. Well, like I said, last time the stock dropped by $15. Will it drop that much this time?
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