NEW YORK – Goldman Sachs is still the king of Wall Street — at least when it comes to making money.

Four days after being accused by the government of fraud in the subprime mortgage mess, the big investment bank reported blowout first-quarter profits of $3.3 billion Tuesday, nearly double from the same period a year ago. But it didn’t get to celebrate.

Goldman spent the day defending itself against Securities and Exchange Commission charges, and saw its troubles mount:

n Britain’s financial regulator began an investigation into the bank’s London-based international operations.

n The European Commission called for tighter regulation of the complex financial investments at the heart of the SEC case.

n Investors brushed off the eye-popping earnings and sent Goldman’s stock falling more than 2 percent. In the past three days, the company’s market value has declined by nearly $13 billion.

Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago, said he couldn’t recall another time when a company reported such stellar earnings only to see its stock fall.

Goldman Sachs Group Inc. executives held conference calls with banking industry analysts and reporters Tuesday, but the questions focused more on the SEC charges than on the firm’s earnings.

The charges grew out of a 2007 transaction involving collateralized debt obligations, or CDOs — complex mortgage-related securities that many analysts say helped accelerate the financial crisis and recession when they plunged in value. The government said Goldman did not tell two clients that the CDOs they bought were crafted in part by billionaire hedge fund manager John Paulson, who was betting on them to fail. Goldman has denied the charge.

“Clearly, there’s a potential for things to get worse,” said market analyst Edward Yardeni, citing the widening probe of the bank’s dealings. “The question is how their clients will react.”

There were growing political overtones to the case, which comes as Congress debates the Obama administration’s proposal to overhaul the nation’s financial rules.

SEC commissioners approved the charges by a 3-2 vote, according to two people with knowledge of the case. The split was along party lines, with both Republican commissioners arguing strenuously to hold back, said the sources, who spoke on condition of anonymity because they were not authorized to discuss the matter.

Party-line split votes are unusual, especially in high-profile cases, former SEC officials said.

SEC Chairwoman Mary Schapiro told reporters Tuesday that the charges against Goldman were “absolutely not” politically motivated. But Ablin said the vote’s timing and the party-line split raise questions about whether the case against Goldman was aimed at swaying public support for tighter controls on Wall Street.

“To me, this case is less about Goldman and more about financial reform,” he said.

The slide in the company’s stock could be a sign that investors believe financial reform will become law — and banks’ profitability will suffer as a result, Ablin said.


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