With the SEC’s announcement Friday of possible wrong-doing by Goldman Sachs, other entities that suffered from the ‘Abacus 2007-AC1′ fund are waking up. German officials announced today that they, too, will begin an investigation. The Deutsche Bank had also taken a deep cut as a result of the mortgage-backed CDO issued by Goldman Sachs. They are not alone, the Royal Bank of Scotland is also considering taking action, as they lost over $600 Million dollars on the deal.

The SEC alleges that Goldman Sachs sold the Abacus collateral debt obligations, put together by their executive, Fabrice Tourre, without telling buyers that Tourre structured the CDO with advice from hedge fund guru, John Paulson. Paulson was not involved in the selling of these CDO, but had taken out credit default swaps (CDS) betting against them. The SEC claims that Paulson had gotten Tourre to bundled ‘toxic’ subprime mortgages in the Abacus securities, knowing full well that such would cause the CDO to decline in value.

According to a report from Reuters, a series of lawsuits may stem from other banks and investment firms as a result. Not only is the German government launching an investigation, the Attorney General of Connecticut, Richard Blumenthal, is also looking into possible fraud and collusion. The Greek government had begun an independent investigation last month, focusing on securities and financing that has left Greece in economic shambles. The EU is also reported to be investigating any possible responsibility on the part of Goldman Sachs in the Greek financial crisis.

Back here is the U.S., many political analysts are saying that this possible scandal is just what President Obama needs to help him get the Democrat financial reform bill passed. However, a deep investigation may prove to be a problem. For example, Obama’s appointee in charge of the Commodity Futures Trading Commission (CFTC), Gary Gensler, is a former executive with Goldman Sachs. Former Treasury Secretary and ex-CEO of Goldman Sachs, Robert Rubin, has also had Obama’s ear. Rubin’s son, Jamie, had a position on Obama’s economic team, and a close friend and former Harvard roommate of Bob Rubin, Michael Froman, was a top fundraiser for Obama’s 2008 presidential campaign. Five top execs from the mega-firm were major contributors as well. Current Treasury Secretary, Timothy Geithner, served under Rubin during the Clinton Administration. Larry Summers also worked for Rubin during the Clinton Era.

Several more economic advisors entered the Obama administration through Rubin’s think-tank, the Hamilton Project. Jason Furman was also part of Rubin’s alumni during the 1990s and later was a director of the think-tank. Diana Farrell works as well as a consultant with Furman in Obama’s National Economic Council. She served under Robert Rubin when he was at Goldman Sachs. Other Rubin associates include two counselors to Geithner, Gene Sperling (another ex-Goldman Sachs employee) and Lael Brainard, as well as David Lipton and Jacob Lew. Heading the Office of Management and Budget is Peter Orszag, who was another director from the Hamilton Project.

As for Capitol Hill, the tentacles of Goldman Sachs are spread far and wide. While contributing to both Democrats and Republicans, the Wall Street giant has leaned more favorably to Democrats. John Paulson, the other major player in the Abacus scheme, just recently held a large fund raiser for Charles Schumer. Chris Dodd has also been a major recipient of campaign contributions from Goldman Sachs, as has Barney Frank and even Joe Biden (before his promotion). This could turn out to be a real can of worms!