This gets a little bit sticky. In the SEC case, the specific sort of security sold was created in part based on the recommendation of an investor who was betting that it would fail. This might not be the case with the short positions from which Goldman profited. But if they underwrote some securities as a part of their shorting strategy, and didn't notify the investors that they sold those securities to of that strategy, isn't that the same wrongdoing that they conceded in the SEC case?

If so, the Goldman might have set itself up for a very tough road if it created securities that it kept the short interest on as part of its investment strategy and not its usual market making activities, but failed to disclose that to investors to whom it sold those securities. It may have been better off fighting the SEC lawsuit, rather than settling it. That settlement essentially concedes that an investor buying a security has a right to know if anyone having an interest in seeing the security decline in value had a role in its creation.

A Different Kind of Bailout

But let's place that aside for a moment. There's an intriguing theory that says no matter how badly Goldman screwed up, a criminal charge won't result. Brad Hintz, an analyst at Sanford C. Bernstein & Co. wrote in a note to clients -- before the subpoena became public knowledge -- wrote that Goldman won't be prosecuted. Via Christine Harper at Bloomberg:

"If an alleged violation is identified during a Goldman investigation, we expect a reasoned response from the Justice Department," Hintz wrote. "In a worst case environment, we would expect a 'too big to fail' bank such as Goldman to be offered a deferred-prosecution agreement, pay a significant fine and submit to a federal monitor in lieu of a criminal charge."

In other words, Goldman could get a different kind of bailout. Instead of a multi-billion dollar rescue, it could be provided a "get out of jail for a fee" card. If federal regulators fear that a criminal charge would bring down the bank, then it may want to avoid another financial crisis and allow its transgressions to slide.

But here's the problem: it isn't federal regulators who have subpoenaed Goldman. This action was taken by the Manhattan DA and New York state. They can take action on their own, without the consent of the Justice Department. So a criminal investigation could still occur, much to the dismay of federal authorities. Of course, politics are tricky, so if these state and local authorities have national political aspirations, then perhaps some federal authorities could convince them to go easy for the sake of a bright future in Washington. If such pleading doesn't work, however, then all federal authorities could do is shrug.

Would a Criminal Charge Bring Down Goldman?

Of course, that prior argument makes a very important assumption: that a criminal charge would bring down Goldman Sachs. When we think about criminal action against big financial firms, Arthur Andersen, the former accounting giant, comes to mind. It was involved in the Enron scandal, and its misdeeds led to the failure of the company, even though the Supreme Court ultimately overturned its associated criminal convictions.