(Bloomberg News) Goldman Sachs Group Inc. is unlikely to face charges from investigations into the firm's mortgage practices before the financial crisis, according to Richard X. Bove, an analyst at Rochdale Securities LLC.

"It is becoming increasingly apparent that a terrible wrong may have been done to Goldman Sachs," Bove wrote in a note to investors dated June 8.

Bove suggested less than a month ago that clients sell the firm's stock because the U.S. Department of Justice was under pressure to bring claims, based on a report from the U.S. Senate's Permanent Subcommittee on Investigations accusing Goldman Sachs of misleading buyers of mortgage-linked investments.

The firm, which paid $550 million to settle Securities and Exchange Commission charges related to its marketing of mortgage securities, was subpoenaed by the Manhattan District Attorney's office for information on business practices leading into the credit crisis, two people familiar with the matter said last week.

Chairman and Chief Executive Officer Lloyd C. Blankfein and other executives at the firm have said that its traders placed "short" bets, which profited when prices of mortgage-linked securities fell, to hedge against losses. Blankfein also said in last year's hearing that Goldman Sachs didn't have a "massive short" against the housing market, and was acting as a "market maker" in selling collateralized debt obligations and other mortgage-backed investments to clients.

Senate Findings

The Senate subcommittee said that documents uncovered in its two-year investigation of the financial crisis show that Goldman Sachs's mortgage traders did have a large short position during 2007 and the sales team aggressively sought clients to buy CDOs that the traders expected would decline in value.

"Evidence is now mounting that the company did not have a net short position" during the time in question, Bove said in his note. "The Senate committee may have misread the numbers."

Bove also said it was "becoming apparent" that Blankfein "did not misrepresent to the Senate Committee because Goldman was not net short at the time the firm was accused of misrepresenting its position.''

Bove maintained his sell rating on Goldman Sachs and lowered his earnings estimates for 2011, 2012 and 2013, citing a "relatively bleak second quarter" and a "weakened" secular outlook.

AG's Review