A subpoena issued Tuesday from the Manhattan district attorney's office looking into Goldman Sachs' role in the financial crisis that devastated investor accounts in the middle and latter part of the last decade and compelled Congress to enact a sweeping regulatory overhaul of the financial services industry could have wide-ranging ramifications for the investment bank.

Tuesday’s news that the Manhattan district attorney’s office has subpoenaed Goldman Sachs doesn’t necessarily mean charges will be filed -- but it’s definitely a blow for the firm.

The legal inquiry comes in the wake of a Senate report from the Permanent Subcommittee on Investigations that suggested that the investment bank repeatedly misled regulators and clients about its practices related to mortgage-backed securities.

“A subpoena is never good news,” says James A. Cohen, associate professor of law at Fordham University School of Law. “I think they’re potentially in a fair amount of hot water.”

The investment bank has not been accused of wrongdoing, as the subpoena is merely a request for information. But Goldman is under mounting scrutiny regarding its role in the financial crisis.

Senator Carl Levin, who led the Congressional inquiry, sent his findings to the Justice Department, which has said it is reviewing the report. But the Manhattan district attorney appears to have moved more aggressively. 

“It’s a sign, it seems to me, that there is frustration,” says Cohen. “There are many questions about the apparent lack of movement in holding some of these bankers responsible about conduct that seems to many to be outrageous.”

The subpoena indicates that the Manhattan DA’s office is “quite serious” about looking into Goldman, says Cohen: “They don’t issue these things lightly.

Asked for comment, Goldman issued a statement that read: "We don't comment on specific regulatory or legal issues, but subpoenas are a normal part of the information request process and, of course, when we receive them we cooperate fully."

The Manhattan DA’s action could play out in various ways. Goldman Sachs might be charged with securities offenses, or individuals within the firm would be charged with securities offenses. There could well be a settlement, says Cohen.

"Chances of a trial are slim because there are few trials in our system anymore,” he says. “I think the Manhattan DA’s office would stay away from that.”

More aggressive action could potentially put the company out of business and have a broad impact on the larger financial system, he noted.

The subpoena is not the first bad news for Goldman related to the financial crisis. The company has faced criticism that it played both sides of the mortgage market prior to its collapse.

The Senate subcommittee’s report questioned testimony by Goldman chief Lloyd Blankfein, who denied the firm was making big bets against risky mortgages while selling securities related to them.


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