Goldman shares rebound

Shares of Goldman Sachs & Co. closed higher Monday after the U.S. Securities and Exchange Commission charged the giant Wall Street investment bank with civil fraud on Friday.

At the open, Goldman shares were down more than two per cent, but by the end of trading they had rebounded to finish up $2.62 to $163.32 — up 1.6 per cent from Friday's close on the New York Stock Exchange.

Goldman will report its latest quarterly earnings before markets open tomorrow.

At the same time, the White House announced U.S. President Barack Obama is heading to New York City later this week to sell reform of the regulatory system over Wall Street.

The speech Thursday at Cooper Union in Manhattan will mark a year since Obama first outlined his ideas for reform and nearly two years since the financial market meltdown.

The Senate could begin debate this week on legislation by Senator Christopher Dodd that would regulate the derivatives market and establish a consumer protection agency for  buyers of mortgages and investment products.

In a news conference Monday, Dodd, chair of the Senate banking committee, said his bill would mean taxpayers "never again are put on the hook for bailouts" and would have prevented "those sort of shenanigans" of which Goldman is accused.

Germany confirmed Monday it is looking into the possibility of seeking compensation from Goldman, and the U.K. said on the weekend it will begin its own probe into Goldman's derivative structure.

Brown calls for investigation

Prime Minister Gordon Brown of Britain called on regulators there to investigate the bank as well to determine if it misled investors in Great Britain.  

On top of this, Europe is already investigating Goldman's role in Greece's debt woes.

"Aside from the probable further damage this could inflict on Goldman's stock price, it injects enough uncertainty into the entire financial sector to keep valuations under pressure," Andrew Pyle, investment adviser at ScotiaMcLeod, wrote in a note.

"Whether this is a complete spoiler for the rally remains to be seen."

The U.S. government has accused Goldman of defrauding investors in its disclosures about securities it sold tied to subprime mortgage securities as the housing market was faltering in 2007.

The SEC said that the investment bank failed to disclose that one of its clients, the giant hedge fund Paulson & Co., helped Goldman Sachs create — and then bet against — subprime mortgage securities that Goldman sold to other investors.

Two European banks that bought the mortgage securities lost nearly $1 billion.