The Goldman Sachs halo has slipped a little in the last few days, as the firm has found itself in the middle of a brawl involving allegations that some of its traders may have been behind attempts to manipulate the market by the spreading of false rumors. Goldman denies the allegations, effectively saying that the claims are nothing more than false rumors themselves.

Goldman is one of a number of firms under investigation by US regulators who are attempting to hunt down short-sellers who may be responsible for spreading false rumors about Bear Stearns in March and, more recently, Lehman Brothers, which resulted in dramatic stock price falls at both firms, and directly lead to the collapse of Bear.

Suspicion has previously fallen on Goldman traders, and, quoting an unnamed person 'with knowledge of the conversation', The Wall Street Journal came out on Wednesday reporting that former Bear Stearns CEO Alan Schwartz had 'pointedly' asked Goldman CEO Lloyd Blankfein earlier in the year whether 'traders in Goldman's London office manipulated the struggling firm's stock'. The newspaper also reports that Lehman boss Dick Fuld told Blankfein that there was 'a lot of noise' that it was Goldman traders who were allegedly spreading negatives rumors about his firm.

Goldman itself is outraged at any suggestion of wrongdoing here, and Lucas van Praag, the firm's global communications chief, said: 'We take great offense at suggestions that we did something wrong. We have gone out of our way to be helpful. Senior executives at Bear and Lehman know that to be the case'.

In the meantime, the US Securities and Exchange Commission has issued subpoenas on several investment banks and over 50 hedge funds, demanding trading records and copies of e-mails, as it sets about the mammoth task of trying to find out who may be guilty of market manipulation in these cases.

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