Potentially interesting development here. Germany may pursue some action against Goldman Sachs (GS) relating to the CDOs itself to a German bank.

Remember, Germany already has hostility towards the company due to its apparent role in helping Greece hide its debt in order to gain entry into the EU.

With Merkel on the ropes a bit due ot the Greek bailout, going after Goldman would probably be a smart political move.

Below the full report from the AP.

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AP BERLIN — The German government may consider taking legal action in a case in which Goldman Sachs & Co. is accused of defrauding investors, a newspaper reported Saturday.

The U.S. government alleges Goldman Sachs sold mortgage investments without telling buyers they were crafted with input from a client who was betting on them failing.

Buyers included German bank IKB Deutsche Industriebank AG — an early victim of the financial crisis that was rescued by the state-owned KfW development bank among others.

The Welt am Sonntag newspaper quoted Chancellor Angela Merkel's spokesman, UIrich Wilhelm, as saying that German regulator BaFin will ask the U.S. Securities and Exchange Commission for information.

"After a careful evaluation of the documents, we will examine legal steps," he said, according to the report.

There was no immediate confirmation from the government.

IKB spokeswoman Annette Littmann said the bank is aware of the charges filed by the SEC, but declined to comment further.

The SEC says IKB lost nearly all its $150 million investment.

IKB issued a profit warning in 2007, saying it had been hurt by U.S. subprime mortgage investments. IKB was sold in 2008 to Dallas-based Lone Star Funds.