Saturday, May 01, 2010

Hurray: Goldman Sachs stock begins to take a pounding

Investors took a pessimistic view of the downgrade as well as the federal prosecutors' probe, notwithstanding that it is far from certain that the inquiry will result in criminal charges being brought. Goldman's stock fell $14.64, or 9.1 percent, to $145.60 in afternoon trading. The stock is down 21 percent since the SEC sued Goldman on April 16.
In addition to the $2 billion so-called collateralized debt obligation that is the focus of the SEC's charges against Goldman, the subcommittee analyzed five other such transactions, totaling around $4.5 billion. All told, they formed a "Goldman Sachs conveyor belt," the panel said, that dumped toxic mortgage securities into the bloodstream of the financial system.

SHOOT: The SEC will win the case if they keep it simple. Not what the instruments were, but were GS cynically selling toxic securities and betting against them. In that contradiction - not the details - is their case for fraud.
clipped from
140,000 petition signatures asking Attorney General Eric Holder for a criminal investigation of Goldman Sachs are displayed during a news conference at the Justice Department in Washington, Wednesday, April 28, 2010. (AP Photo/Haraz N. Ghanbari)

WASHINGTON (AP) -- Shares of Goldman Sachs Group Inc. plunged 9 percent Friday after word that the Justice Department had opened a criminal investigation of the Wall Street powerhouse over mortgage securities deals it arranged.

The SEC brought civil fraud charges against Goldman and a trader in connection with the transactions in 2006 and 2007. The agency alleged the firm misled investors by failing to tell them the subprime mortgage securities had been chosen with help from a Goldman hedge fund client, Paulson & Co., that was betting the investments would fail. Goldman and the trader, Fabrice Tourre, have denied wrongdoing and said they will contest the allegations in court.

Following news of the probe, Standard & Poor's Equity Research analysts downgraded Goldman's shares to "Sell" from "Hold" and lowered their target price by $40 to $140.

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