CNBC's Cramer Predicts Goldman Sachs to Get Record-Breaking $2-3 Billion Fine, Management Possibly Let Go

While questions swirl about the ins and outs of the Securities and Exchange Commission charges against Goldman Sachs (NYSE:GS), and the eventual result is no clearer.

According to CNBC "Mad Money" host Jim Cramer, after the release of several e-mails from Goldman traders, including Fabrice Tourre, who described the investments at the firm "like Frankenstein," the investment bank finds itself in an untenable position.

Cramer told MSNBC's April 26 "Morning Joe" that Goldman really has no defense if, as the government alleges, Goldman misled investors when it established a mortgage-backed security in 2007 for a hedge fund client looking to bet against the housing market. And that's in addition to facing heat from shareholders for not revealing that it received a Wells Notice from the SEC.

"What makes this worse than most situations is that it's entirely possible this young guy, who's now holding the whole firm hostage, Fabrice Tourre - it's entirely possible that he sold it fraudulently," Cramer said. "If he did, then Goldman has no defense. So, what I would emphasize at this particular moment is that this guy is way too powerful. The hearings are going to go badly. Goldman knew they were going to have a Wells Notice, knew they were going to get prosecuted. They didn't reveal it. It was totally material. Again they did that wrong."

Cramer argued that Goldman would have better served by approaching the government hat in hand rather than taking an aggressive tack against the charges. As things are, however, he predicted serious consequences for the firm and its management.

"The main thing you have to understand is that Goldman has basically said, ‘Government, you're just dead wrong,' instead of saying, government, ‘We're sorry, what do you need to do?'" Cramer explained. "In order to end this, if it's a settlement, they will have to pay the largest fine in history and it's questionable whether senior management's going to be able to stay. A lot of this is Goldman's doing."

"Morning Joe" co-host Mika Brzezinski was skeptical of Cramer's analysis, telling him to "separate the fact that you worked there," and asked why criminal charges aren't being pressed against employees at Goldman Sachs.

"Look, because they haven't referred it," Cramer explained. "Remember, who commissioners said - no, no, it's not criminal. As a lawyer, it's not criminal."

But the "Mad Money" host said it isn't frivolous either. The government "has a real case," he said, that "Goldman has to settle. This is a ridiculous thing Goldman is doing." The bottom line, according to Cramer is a settlement for "$2 Billion, $3 billion, and management may not stay."