Goldman Sachs Group Inc. (NYSE: GS) was already getting negative press for profiteering from the demise of the mortgage market.  It isn’t that it made billions off that, it is that it did it while simultaneously pawning securities off to clients for years as “AAA” safe fixed income alternatives.  An action out of the Securities & Exchange Commission is hurting shares of Goldman Sachs and is now a problem that w
ill not go away.

The SEC has charged Goldman Sachs with fraud over the structuring and marketing of CDO products tied to subprime mortgages.  It alleges that Goldman misstated and omitted key facts as the housing market started to see problems. Some of the synthetic structures and marketing efforts are tied to performance of RMBS (residential mortgage-backed securities).  Charges are that Goldman Sachs failed to disclose vital information and failed to disclose its role and the role of hedge funds where Paulson & Co. supposedly paid Goldman Sachs to structure a deal where Paulson could take short positions.

Goldman Sachs shares are down 7.8% at $169.95 on 12.8 million shares after the stock opened at $183.62 after closing at $184.27 yesterday.