- Downgrades Crush Goldman Sachs Stock On News of Criminal Investigation
- How the Goldman Sachs Fraud Case Could Accelerate Wall Street Reform
- Continued Corruption on Wall Street is Sapping Investor Confidence on Main Street
Standard & Poor's Financial Services LLC downgraded Goldman to sell from hold and lowered its price target to $140 from $180.
"Though traditionally difficult to prove, we think the risk of a formal securities fraud charge, on top of the SEC fraud charge and pending legislation to reshape the financial industry, further muddies Goldman's outlook," S&P analysts wrote in a note to clients Friday morning.
The Goldman Sachs fraud case, which relates to the investment bank's subprime-mortgage business, caused the financial giant's shares to nosedive 12.8%. The fallout spread to the broader markets, too, causing the Dow Jones Industrial Average to drop 1.1% and the Standard & Poor's 500 Index to skid 1.6%.
That reaction wasn't overblown.
Depending on how rough the SEC wants to play it, the case has the potential to shut down the cartel known as Wall Street. It could even jump-start the kind of sweeping overhaul that legal or regulatory reformists have so far failed to launch.
A couple of days ago, I caught an episode of the American Experience on my local PBS station that covered 1929 stock market crash. The episode in question had premiered in 1990, and featured first-hand accounts - as well as interviews - with historian Robert Sobel and economist John Kenneth Galbraith. It has an interview with Patricia Livermore, daughter-in-law of trading great Jesse L. Livermore and the subject of the annotated version of "Reminiscences of a Stock Operator" that I just completed. (Publication date is Jan. 10).