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Goldman Rumor Mill Revs Up

Two months after it reported eye-poppingly good third-quarter earnings, Goldman Sachs (GS) is again the talk of Wall Street -- but not in a way the firm might like.

Shares of the brokerage firm tumbled 4% Friday as rumors about the quality of the firm's earnings roiled Wall Street. In the wake of Merrill Lynch's (MER) writedown mess last week, traders were talking about whether Goldman could be forced into a similar move.

Goldman called the writedown rumors "untrue," but TheStreet.com has learned that a Wall Street self-regulatory body -- the Financial Industry Regulatory Authority -- is examining Goldman's blockbuster profits as well.

A spokesman at FINRA in Washington, D.C., declined to comment on any look at Goldman's books, as did Goldman.

But a person familiar with the self-regulatory organization, which is responsible for governing business between brokers, dealers and the investing public, says FINRA has been stepping up its focus on examining securities firms in the wake of the mortgage mess that has seen many big firms incur billions in writedowns.

It's unclear if the audit being conducted is a routine audit or an examination of whether the firm appropriately marked down esoteric debt on its balance sheet. FINRA was created earlier this year in the merger of the regulation arms of the NASD and the NYSE.

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