Goldman Fights Back After Bombshell Allegations

April 19, 2010— -- ABC News has obtained sales literature that Goldman Sachs used to push the controversial mortgage product that has them in trouble with the SEC.

In the sections on risk and disclaimers there is no mention that the product had been partly engineered by another Goldman client -- which, the SEC charges, designed it with the expectation it would fail.

Still, these are just allegations, and now there are new signs Goldman Sachs plans to come out swinging.

Executives at Goldman sent out an internal memo reading, "...we believe that the firm's actions were entirely appropriate, and will take all steps necessary to defend the firm."

But those words come after the bombshell allegations Friday that Goldman allegedly duped clients into investing in a mortgage product put together by another one of Goldman's own clients.

The SEC says that client is hedge fund giant John Paulson, which was allegedly looking to profit when the product then failed as planned.

Federal regulators say investors lost more than $1 billion.

In taking on Goldman Sachs, the SEC is facing off against Wall Street's giant, a bank with powerful ties to Washington.

Two recent Treasury Secretaries came from the bank, Secretary Robert Rubin and Secretary Hank Paulson.

Duff McDonald, author of the book "Last Man Standing," says there is no question Goldman is the most powerful bank on Wall Street.

"Regulators, politicians, the public are out for scalps and Goldman is the biggest scalp of all," he says.

And they know it.

Over the weekend Goldman CEO Lloyd Blankfein left a voicemail for his employees in which he said, "The extensive media coverage on the SEC's complaint is certainly uncomfortable, but given the anger directed at financial services, not completely surprising."

Industry insiders say there is outrage inside the bank, along with a belief that Goldman is being made a scapegoat for the kind of product that was pushed by many of the biggest investment banks.

Gregory Zuckerman, author of "The Greatest Trade Ever" says this investment was not a secret at the bank. "What will be interesting is to see is whether senior people knew how this deal was sold to investors," he says.