The Justice Department has commenced a criminal investigation of Goldman Sachs:

Federal prosecutors have opened an investigation into trading at Goldman Sachs, raising the possibility of criminal charges against the Wall Street giant, according to people familiar with the matter.

While the investigation is still in a preliminary stage, the move could escalate the legal troubles swirling around Goldman.

The Securities and Exchange Commission, which two weeks ago filed a civil fraud suit against Goldman, referred its investigation to prosecutors for the Southern District of New York, which has now opened its own inquiry.

I saw this coming. The SEC, having been called out by Goldman Sachs and others for the weakness of its legal theories and case, is bringing in the big hammer, the threat of criminal prosecution.

The government’s push to bring Goldman Sachs to heel is no kabuki.

The Obama administration and Democrats in Congress want Goldman Sachs to capitulate and confess.

This is not about Goldman Sachs’ conduct or the law. This is about whipping up populist emotions in the run-up to the 2010 elections and crushing one of the few private-sector entities still willing to defy the administration.

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