Should you be very bothered by the Goldman Sachs subpoena?

Needless to say, Goldman Sachs has been subpoenaed. Yesterday its shares hit a one year low.

We've already looked at the advisability or not of working for Goldman Sachs in light of its perpetual vilification. Should the subpoena make any difference?

Yes: this is a criminal investigation

As the Financial Times points out, the subpoena has been issued by the Manhattan district attorney and not by the New York state attorney-general.

While the New York state attorney-general can bring both criminal and civil charges, the Manhattan district attorney can only bring criminal charges. If anything comes of this, it will be a criminal case.

No: this is just a call for information

A subpoena is no more than an informational request. It is not necessarily a prelude to a criminal investigation.

Douglas Burns, a formal federal prosecutor, told Bloomberg yesterday that he wouldn't read to much into it and that it's "just an initial attempt to gather information."

Yes: Senior Goldman Sachs staff could be accused of attempting to defraud investors

The Wall Street Journal describes the subpoena as 'broad.'

Much of it is likely to relate to the Abacus affair from last year, in which Goldman was accused by the SEC of working with hedge fund manager John Paulson to structure a portfolio of mortgaged backed securities that would definitely lose money so that Paulson could short it and of then selling this portfolio on to investors who were unaware of Paulson's involvement and were led to believe it was a reasonable purchase to make.

"The core of this case is securities fraud," Jacob Zamansky, a securities-arbitrage attorney with Zamansky & Associates LLC, told Bloomberg. "The Manhattan attorney is looking at a number of individuals who may have had an intention to defraud investors and that would be a criminal case."

Proof of that intent is likely to boil down to various emails mentioned in Matt Taibbi's recent Rolling Stone article.

Most notoriously, one Goldman salesperson described the naive Australian hedge fund Basis Capital, which bought $100m of toxic mortgage products, a "white elephant, flying pig and unicorn all at once."

Subcommittee Chairman Senator Carl Levin thinks there's a case against Goldman. Taibbi's quotes him as saying: "In my judgment, Goldman clearly misled their clients, and they misled the Congress."

From this perspective, it doesn't look good.

No: Goldman Sachs has already settled the Abacus affair

Goldman was vindicated of any wrongdoing related to Abacus by the SEC, and settled for around $500m. Surely this should be an end to it?

It's also not clear precisely what the subpoena will turn up. All the other information related to the Abacus case has already been available for 18-36 months. The question is whether the Manhattan attorney will interpret it differently to the SEC.

Yes: Senior Goldman staff could be accused of lying under oath

The case put together by the Manhattan attorney is also likely to focus on whether Goldman executives deliberately mislead Congress.

Again, Taibbi devotes a lot of space to this claims. For example, Taibbi points out that Daniel Sparks, Goldman's ex-head of mortgage trading told Congress he expected Timberwolf to "perform" at the time he was selling it, although an internal document from 2007 revealed that he thought it was a

Similarly, Lloyd Blankfein is accused of misleading Congress when he said Goldman didn't have a massive short position against the mortgage market.

Predictably, the calls for Blankfein to step down are getting more cacophonous. The penalty for lying under oath could be up to five years imprisonment.

No: Even if senior staff are forced to step down, Goldman will survive

In this week's note on Goldman Sachs, JPMorgan analyst Kian Abouhossein described Goldman as an "investment banking machine" with a deep talent pool. Even if Blankfein and others go, Goldman will survive - although its survival might be harder if Blankfein et al go with criminal charges hanging over them.

Yes: If Goldman were indicted, it would be very bad

US analyst Dick Bove thinks the US government is going to keep pursuing Goldman because it needs culprits for the financial crisis. He takes the example of Richard Mellon, the richest man in the US in 1936, who was pursued by President Roosevelt for 6 years in 1936, by which time he'd died and created the National Gallery of Art in penance.

Bove's message is that even if Goldman isn't indicted, the US government won't leave it alone. If Goldman is indicted, it could be a disaster. Investors are likely to sell the stock, clients are likely to steer clear, capital is likely to become prohibitively costly and inaccessible. Think Lehman or Arthur Anderson.

No: Even if the subpoena comes to something, the US government wouldn't risk destabilising Goldman Sachs

This was the argument put out by US analyst Brad Hintz in his note earlier this week. Hintz argues that at the very worst, Goldman would be offered a 'deferred-prosecution agreement, pay a significant fine and submit to a federal monitor in lieu of a criminal charge.'

Hintz points out that after the Arthur Anderson disaster (in which the accounting went under following charges which were later overturned), the US Justice Department is going for a lighter touch and treating companies facing criminal indictments, "like juvenile offenders, that can be 'rehabilitated' with Federal supervision."

However, as various people have noted, Goldman isn't being subpoenaed by the Justice Department, it's being subpoenaed by the Manhattan district attorney, who may turn out to be a law unto himself.

Worried? Maybe you should work for Deutsche Bank instead.