Goldman Sachs received a subpoena from the office of the NY District Attorney, as the government expanded its investigation into the investment bank's role in the financial crisis.   News of the subpoena dropped Goldman shares as low as $131.50, off $4.50 from the previous day's close.  However, as of 3:00 p.m., its share price had bounced back to $135. 

The inquiry stems from a 650-page Senate report from the Permanent Subcommittee on Investigations that indicated Goldman had misled clients and Congress about its practices related to mortgage-linked securities.  Senator Carl Levin (D-MI), who headed up the Congressional inquiry, had sent his findings to the Justice Department to figure out whether executives broke the law;  the agency said it was reviewing the report.

The subpoena come 2 weeks after lawyers for Goldman Sachs reportedly met with the attorney general of New York’s office for an “exploratory” meeting about the Senate report.

The investment bank has not been accused of any wrongdoing. A subpoena is a request for information.

Senate's Scathing Report.   In early April, the Senate subcommittee published a scathing report, which took specific aim at Goldman.  It notably highlighted testimony by the institution’s chief executive, Lloyd Blankfein, who denied the firm was making large bets against residential mortgages while selling securities based on home loans.  “We didn’t have a massive short against the housing market,” Mr. Blankfein testified at a Congressional hearing in 2010. It was a sentiment echoed in various public statements that year.

The Senate committee took a different view, and its report noted the phrase “net short” appeared more than 3,400 times in Goldman documents related to the mortgage market.  The report also quoted a letter from Goldman to the SEC in which the firm said “we maintained a net short sub-prime position and therefore stood to benefit from declining prices in the mortgage market.”

For further details, go to:   [NYT Dealbook, 6/2/11]   and    [Bloomberg, 6/2/11]