Goldman Sachs Can Now Stop Whining

A report that Morgan Stanley's own CDO-related conduct is being looked at by the Justice Department may mean Goldman Sachs is no longer being singled out for punishment.
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) -- What a relief that it now appears that

Goldman Sachs

(GS) - Get Report

is not the only big bank being investigated by the U.S. Justice Department over its role in creating, selling and trading and some of the complex securities at the heart of Great Financial Meltdown of 2008.

Not that it is a big surprise, but

The Wall Street Journal

is reporting Wednesday that

Morgan Stanley

(MS) - Get Report

is also under investigation. Morgan Stanley CEO James Gorman has said he has no knowledge of a federal probe of the company.

Goldman Sachs boosters love to complain about how their firm bears the brunt of all the anti-Wall Street fervor even though Goldman, according to its fans, holds itself to a higher standard of behavior than peers like Morgan Stanley,


(C) - Get Report


Bank of America

(BAC) - Get Report


There may actually be a grain of truth to this Goldman propaganda. I don't think Goldman avoided the bulk of the massive writedowns that plagued its competitors by being the sleaziest and trickiest of the bunch. But that doesn't mean Goldman isn't sleazy and tricky. Tony Soprano or Don Corleone might have held themselves to a higher standard than other mobsters, but they were still mobsters.

To be clear, I am not equating investment bankers with mobsters. It would be an interesting comparison though. During the past decade or so, the investment banking industry's regulators did a pretty good job of keeping small-time crooks at bay while letting the big criminals make off with the real loot. It's kind of the way the mob operated before the RICO law was passed in 1970.

Truth be told, I was a bit worried about all the attention the Feds seemed to be focusing on Goldman. How could they look at Goldman without looking at all the other banks that doubtlessly put together similarly tricky debt deals? After all, as my colleague Lauren LaCapra pointed out, Goldman underwrote far fewer

collateralized debt obligations transactions

-- the deals the Feds are looking at -- than Bank of America, Citigroup, and

JPMorgan Chase

(JPM) - Get Report


Still, it isn't merely the underwriting of CDOs that the Feds appear to be interested in, but the potential conflict between selling the deals and betting against them without making clear to buyers that's what they were doing. Goldman's competitors appear to have done far less shorting of CDOs than Goldman did. Still, the rivals did some shorting, and they could be hearing from federal investigators soon if they haven't already.

In the meantime, Goldman investors can take heart. Goldman shares were up slightly in early trading on Wednesday amid the sharp selloff in Morgan Stanley. See, Goldman: you're not that special.


Written by Dan Freed in New York