Goldman Sachs Won't Be Last Bank Fingered: Poll

Goldman Sachs may be the first of the major Wall Street powers to face fraud charges, but it's not likely to be the last, according to the results of a new poll by <I>TheStreet</I>.
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NEW YORK (TheStreet) -- Goldman Sachs (GS) - Get Report may be the first major Wall Street power broker to face fraud charges, but it's not likely to be the last big bank with a target on its head.

If recent statements from worldwide regulators and global investors are any indication, it's also not just the

Securities and Exchange Commission

that is feeling litigious when it comes to the Street practices that typified the most recent recession.

Since the

SEC filed civil fraud charges against Goldman Sachs

on April 16, Goldman's share price has declined in inverse proportion to the number of parties stepping forward to say they want to join the SEC's Goldman fraud party.

European regulators and investors have been the most vocal about going after Goldman Sachs. On Wednesday, France's economy minister Christine Lagarde said Goldman's allegedly fraudulent actions warranted a full investigation by French regulators. Regulator AMF (Autorite des Marches Financiers) stated that it planned to publish a report on its investigation of Goldman in the coming week.

On Tuesday

Britain's Financial Services Authority (FSA) said it had started a formal investigation into Goldman Sachs International

in relation to the SEC allegations, and planned to work closely with the SEC.

Germany's main financial regulatory body, BaFin, was also reportedly considering a probe of Goldman Sachs this week, as German banks were among the biggest losers in the subprime mortgage synthetic CDOs, Abacus, that the SEC alleges Goldman fraudulently marketed.

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German bank

IKB Deutsche Industriebank

lost $150 million in an Abacus CDO and told the press that it was reviewing whether or not it had grounds for a legal case against Goldman Sachs.

The biggest loser among Goldman Sachs investors,

Royal Bank of Scotland

(RBS) - Get Report

, was also considering court remedies, though it too had found no grounds on which to sue Goldman as an investor. The SEC court filing indicates that Royal Bank of Scotland Group paid $841 million to invest in toxic subprime U.S. mortgages.

It seemed that one might need an abacus to keep track of all the regulators that were aiming at Goldman Sachs' Abacus series.

Nevertheless, the jury was still out on whether the Goldman case would morph into a larger investigation into the practices of other Wall Street firms known for marketing similar investments to Abacus.

The negative press for Goldman concerning its ethics wasn't showing any sign of slowing down as the weekend approached, either.

On Thursday and Friday, there were reports that a Goldman director who is on his way out of the board room, Rajat Gupta, passed along insider trading information to disgraced hedge fund manager Raj Rajaratnam of Galleon Group, about

Warren Buffett's $5 billion investment in Goldman Sachs during the financial crisis.

Deutsche Bank had suffered the most among financial firms in the wake of the SEC fraud case against Goldman, shedding 9% of its share price on April 16. Deutsche Bank shares have not recovered since, and closed the week at $72.10, or $2 below the share price at which Deutsch Bank had ended trading on Apr. 16.

With the fears of further legal action potentially holding down valuations in the banking sector -- even amid some fairly healthy earnings reports from the likes of

Citigroup

(C) - Get Report

--

TheStreet

decided to reach out to its bank stock-trading audience and ask for its legal opinion.

Specifically, we asked:

Now that Goldman Sachs has been charged with fraud by the SEC, will other big banks be next?

Regulators in the U.S. and Europe may not have been forthcoming in answering this questions, but

TheStreet

readers were more than willing to express their banking sector worries.

Approximately 73% of survey takers said that Goldman will not be the only bank to find itself before a judge before all the regulatory scrutiny of subprime investments ends.

Only 27% of survey respondents expect the rest of the usual bank suspects to be largely immune from charges similar to the Goldman Sachs fraud charges.

Goldman Sachs remains vigorous in its denial of the charges. This week Goldman used its earnings conference call -- a big earnings beat, no less -- as a platform for co-general counsel Greg Palm to extend the bank's defense. Palm reiterated Goldman's stance that the SEC charges were unfounded. Palm also reiterated the financial sector party line that the investors involved in these deals were sophisticated investors.

It's a soundbite that the ratings agencies like

Moody's Investor Service

(MCO) - Get Report

were also using by the end of the week, as they came before Congress to testify about their one-time glowing endorsement of the subprime investments.

The best Congressional testimony may be on deck, too.

Next Tuesday, Goldman Sachs CEO Lloyd Blankfein and the 31-year old Goldman Sachs man-behind-the-subprime scenes, Fabrice Tourre, are reportedly expected to face off against the Senate.

It's "god's workers" versus the grand-standing senators, and pay-per-view television could likely make a bundle if it could only get the major parties into ultimate fighting costumes.

Yet whether Blankfein and Tourre's appearances will be the only by bank executives battling the political powers -- well, that's an outcome that investors apparently find unlikely.

-- Reported by Eric Rosenbaum in New York.

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