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Goldman Sachs Attention Unwanted

NEW YORK ( TheStreet) -- Goldman Sachs (GS - Get Report) may rue the day it got into bed with the U.S. government, if trends in public opinion continue to develop.

From a Rolling Stone expose to political pundits and concerns about high-frequency trading, Goldman Sachs' name keeps turning up.

Now, The Wall Street Journal is asking questions about its "trading huddle," where analysts and traders discuss thoughts on the market and, in at least one case, offered meeting advice that differed from a published report.

On the surface, it doesn't appear that Goldman did anything illegal, nor is there clear evidence of unethical behavior. The meetings were focused on short-term trading ideas, not long-term ones found in analyst reports. Furthermore, one might ask why an investor or trader would be a client of Goldman Sachs if it didn't deliver an edge.

Nevertheless, FINRA and the SEC want to investigate the matter. It's a good idea, if for nothing else than to clear the air, but it's yet another case of the regulators acting after the public dissemination of information.

Government regulators and (formerly) quasi-government entities such as Fannie (FNM) and Freddie (FRE) were complicit in the financial crisis because their name was a stamp of approval; subprime debt gained legitimacy because Fannie and Freddie were buying it.

The SEC approved the rating agencies that gave triple-A ratings to garbage. And many investors are cavalier about who they invest with because they believe the SEC is watching their back. Madoff and R. Allen Stanford proved otherwise.

Instead of focusing on this specific incident, which doesn't yet show evidence of clear wrongdoing, I'd ask why the Journal ran this story on the front page. And I believe the answer is that the public is not happy with financial institutions in general, and certainly not with firms that have benefited directly, such as JPMorgan (JPM - Get Report), Citigroup (C - Get Report), Bank of America (BAC - Get Report) and AIG (AIG - Get Report) (through cash infusions) or indirectly, in the case of Goldman Sachs (through the selective bankruptcy of the competition, and cash infusions that passed through other firms).

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