Let the prosecutions begin -- Justice Department open criminal probe of Goldman Sachs

Word comes from New York that federal prosecutors have finally started the practically unconscionably delayed investigation into whether Goldman Sachs and other Wall Street traders should be held criminally liable for crashing the nation's housing market in 2006 and kicking off the global recession. Unnamed sources told the New York Times that the U.S. Securities and Exchange Commission, which last month filed a civil lawsuit accusing Goldman Sachs of fraud, referred its findings to the U.S. Justice Department. Goldman Sachs has denied the allegation in the fraud suit, which accuses the firm of defrauding investors in its Abacus 2007 AC1 collateralized debt obligations. According to the SEC, investors in the Abacus deals were not told that Goldman Sachs was simultaneously allowing other people to bet that the mortgage market would fall. When the market collapsed, Abacus investors lost millions but other investors enjoyed a windfall. One trader, hedge fund manager John Paulson earned more than $1 billion when value of bonds he helped select for Abacus investors crashed, the SEC alleged. Paulson has not been charged with any wrongdoing, the Times said. Of course, getting investigated is not the same as being charged, just as being charged is not the same as being guilty. In fact, two hedge fund managers at Bear Stearns were acquitted of criminal charges last year.