Justice department probes Goldman Sachs

An investigative report that found Goldman Sachs Group Inc misled clients about mortgage-linked securities has been referred to the Justice Department and the Securities Exchange Commmission by US senators.

According to senator Carl Levin, Democratic chairman of the Senate permanent subcommittee on investigations, a two-year probe had found that banks, including Goldman and Deutsche Bank, had used ''a variety of troubling and sometimes abusive practices'' in the creation and sale of collateralised debt obligations (CDOs).

According to analysts, the scrutiny is a setback for Goldman Sachs, which hired lawyers, lobbyists and public relations specialists to monitor the two-year Senate probe and tone down any controversy that could arise from the conclusions of the subcommittee. 

According to Levin with the report being referred to the agencies, the agencies have the full report not just specific facts for scrutiny. The inquiry also called for a probe into the role of credit-rating firms in the meltdown, lax oversight by regulators and the decline in lending standards at banks including Washington Mutual Inc. that fueled the mortgage bubble. 

Analysts say, for Goldman Sachs, the question was how much pain they would have to endure with the public spotlight for the revelations. 

However analysts are skeptical whether the probe by the agencies would lead to new claims against Goldman Sachs, which last year forked out $550 million to settle SEC claims related to its marketing of the complex securities known as CDOs.