Did Goldman Sachs commit a crime?

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Things keep getting worse for Goldman Sachs. Late yesterday news broke that federal prosecutors are looking into whether to bring criminal fraud charges against the Wall Street firm. (The outstanding SEC lawsuit involves only civil charges.) No word yet on any details about what those new charges may entail.

Nonetheless, stock analysts are already downgrading their recommendations on Goldman.

What to think? I am going to take my cue from Charlie Munger, Warren Buffett’s long-time business partner, and a big owner of Goldman shares (via Berkshire Hathaway). From the WSJ:

While Mr. Munger thinks Goldman did nothing illegal, the firm was engaged in “socially undesirable” activities, he said in an interview after the SEC lawsuit was filed.

“They were very competitive in maximizing profits in a competitive industry that was permitted to operate like a gambling casino,” Mr. Munger said. “The whole damn industry lost its moral moorings.”

He added that he believes Goldman is “more prudent and ethical” than other big Wall Street banks.

I guess we’ll find out how far that gets them.