Last night the Wall Street Journal reported that Morgan Stanley is being investigated for its mortgage derivative sales practices. This is very good news for Goldman Sachs as they can now use the "all my friends were doing it" excuse. I doubt the government is looking to take down the last two remaining independent investment banks. More likely they are waging a public relations war to get financial reform passed and look like they are doing something before the election.
Goldman's market cap has taken a $25 billion hit since news of the investigation broke. This increasingly seems like an exaggerated amount. Any government penalty is likely to be a fraction of that. The fact that others were allegedly knowingly selling crap to their customers makes it less likely that customers will defect to other firms. While this does not make Goldman's behavior right it does make their stock look cheap.