Goldman Drops as Bove Says Sell on Pressure to Prosecute

Goldman Sachs Group Inc. closed at its lowest level in more than eight months after an analyst told investors to sell the stock on concern that the Department of Justice faces growing pressure to bring claims against the firm.

The bank dropped $5.13, or 3.5 percent, to $142.75 in New York Stock Exchange composite trading, the biggest decline since a 4.7 percent decrease on Jan. 19. The last time the stock closed lower was Sept. 2.

Goldman Sachs, the fifth-biggest U.S. bank by assets, was one of three banks singled out last month in a report on the financial crisis by the U.S. Senate’s Permanent Subcommittee on Investigations. The panel, whose findings were referred to the Justice Department and the Securities and Exchange Commission, said Goldman Sachs misled clients about its bets on mortgage-related investments.

“It now appears that the pressure on the Justice Department to bring a criminal lawsuit against Goldman is building to a high pitch,” Richard X. Bove, an analyst at Rochdale Securities LLC, said in a note today to investors.

Stephen Cohen, a spokesman at New York-based Goldman Sachs, declined to comment on Bove’s note and the stock price decline.

Bove, who is based in Lutz, Florida, is one of two analysts with a negative rating on Goldman Sachs, according to data compiled by Bloomberg. The other is Christopher Wheeler, a London-based analyst for Mediobanca SpA. Of 28 analysts surveyed, 17 recommend that investors buy the stock and nine call for holding it.

‘Vampire Squid’

Bove cited a new article by writer Matt Taibbi in Rolling Stone magazine that says the Justice Department should criminally charge Goldman Sachs based on the subcommittee’s report. In a 2009 story for Rolling Stone, Taibbi wrote an article about Goldman Sachs that labeled the firm “a great vampire squid wrapped around the face of humanity.”

“The new Matt Taibbi article in Rolling Stone magazine is another all-out attack on the company,” Bove wrote in today’s note. “However, this time the attack is backed by a 650-page report signed by both a Democrat and a Republican.”

Goldman’s Cohen also declined to comment on Taibbi’s article.

Attorney General Eric H. Holder, testifying before the House Judiciary Committee on May 3, confirmed that his department is reviewing the Senate’s report, which was led by Michigan Democrat Carl M. Levin and Oklahoma Republican Thomas A. Coburn.

‘Not Losing Sleep’

“The department is looking right now at the report prepared by Senator Levin’s subcommittee that deals with Goldman Sachs,” he said.

When the report was released, Goldman Sachs said it never misled anyone about its behavior. “The testimony we gave was truthful and accurate and this is confirmed by the subcommittee’s own report,” a Goldman Sachs spokesman, Lucas van Praag, said at the time.

Brad Hintz, an analyst at Sanford C. Bernstein who recommends that investors buy Goldman Sachs stock, said he doesn’t share Bove’s concerns about the political risk to Goldman Sachs.

“At this point, I’m not losing sleep over more theater from within the Beltway,” Hintz said in an e-mailed reply to questions. “GS remains the leading investment bank in the world.”





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