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Goldman Sachs attacked at hearing | Goldman Sachs attacked at hearing |
(30 minutes later) | |
The chairman of an inquiry into the causes of America's financial meltdown has attacked the role of Goldman Sachs. | The chairman of an inquiry into the causes of America's financial meltdown has attacked the role of Goldman Sachs. |
Senator Carl Levin spoke of the reckless greed that infected Wall Street's financial community. | Senator Carl Levin spoke of the reckless greed that infected Wall Street's financial community. |
In his opening address to the hearing in Washington, Mr Levin said Goldman executives had caused widespread harm to their fellow citizens. | In his opening address to the hearing in Washington, Mr Levin said Goldman executives had caused widespread harm to their fellow citizens. |
Several Goldman executives are giving evidence at the hearing, and all have denied they acted improperly. | Several Goldman executives are giving evidence at the hearing, and all have denied they acted improperly. |
The men from Wall Street spend their time rifling through folders of documents in front of them, looking tense and uncomfortable. Mark Mardell, BBC North America editor href="http://www.bbc.co.uk/blogs/thereporters/markmardell/2010/04/goldman_the_grilling_continues.html">Read Mark's blog in full | |
Mr Levin, chairman of the Senate Permanent Subcommittee on Investigations, said that Goldman had proclaimed a responsibility to its clients, "yet the evidence shows that Goldman repeatedly put its own interests and profits ahead of the interests of its clients and our communities". | Mr Levin, chairman of the Senate Permanent Subcommittee on Investigations, said that Goldman had proclaimed a responsibility to its clients, "yet the evidence shows that Goldman repeatedly put its own interests and profits ahead of the interests of its clients and our communities". |
The firm packaged complex mortgage-backed securities and then sold them to investors not only knowing that the housing market was about to collapse but also profiting from it, the committee alleges. | The firm packaged complex mortgage-backed securities and then sold them to investors not only knowing that the housing market was about to collapse but also profiting from it, the committee alleges. |
Goldman is also facing specific allegations from the Securities and Exchange Commission (SEC) that it defrauded investors by not telling them that one of its financial products was designed by a firm that was betting it would fail. | Goldman is also facing specific allegations from the Securities and Exchange Commission (SEC) that it defrauded investors by not telling them that one of its financial products was designed by a firm that was betting it would fail. |
Goldman says the SEC allegations are wrong in "fact and law". | Goldman says the SEC allegations are wrong in "fact and law". |
Mr Levin said it was not his committee's role to judge the legality of the SEC's claims, adding that the hearing was concerned with "ethics and policy". | Mr Levin said it was not his committee's role to judge the legality of the SEC's claims, adding that the hearing was concerned with "ethics and policy". |
But he said that Goldman's actions reverberated around America. The firm's "misuse of exotic and complex financial structures helped spread toxic mortgages throughout the financial system," he said. | But he said that Goldman's actions reverberated around America. The firm's "misuse of exotic and complex financial structures helped spread toxic mortgages throughout the financial system," he said. |
"And when the system finally collapsed under the weight of those toxic mortgages, Goldman profited from the collapse," he added. | "And when the system finally collapsed under the weight of those toxic mortgages, Goldman profited from the collapse," he added. |
Goldman executives at the hearing include Fabrice Tourre, Daniel Sparks, Joshua Birnbaum, and Michael Swenson. | Goldman executives at the hearing include Fabrice Tourre, Daniel Sparks, Joshua Birnbaum, and Michael Swenson. |
Lloyd Blankfein, the firm's chief executive, is due to appear later in the day. | Lloyd Blankfein, the firm's chief executive, is due to appear later in the day. |
Time wasting | Time wasting |
FABRICE TOURRE 31-year-old executive director of Goldman Sachs InternationalCharged with securities fraud for making misleading statements to investorsResponsible for Abacus 2007-ACI, the complex financial product at the centre of the financial regulator's investigation. Denies chargesReferred to himself as "the fabulous Fab" in an e-mail Goldman: 'Fab' Tourre's emails Was what they did really that wrong? | FABRICE TOURRE 31-year-old executive director of Goldman Sachs InternationalCharged with securities fraud for making misleading statements to investorsResponsible for Abacus 2007-ACI, the complex financial product at the centre of the financial regulator's investigation. Denies chargesReferred to himself as "the fabulous Fab" in an e-mail Goldman: 'Fab' Tourre's emails Was what they did really that wrong? |
In the opening session, Mr Levin and other committee members challenged the Goldman executives about their duty to clients and the amount of money the firm made in the housing market. | In the opening session, Mr Levin and other committee members challenged the Goldman executives about their duty to clients and the amount of money the firm made in the housing market. |
Clearly frustrated at some of their answers, Mr Levin accused the executives of evading the questions and of having "a strategy" to waste time. | Clearly frustrated at some of their answers, Mr Levin accused the executives of evading the questions and of having "a strategy" to waste time. |
"We're going to stay here as long as it takes to get this information," Mr Levin warned the executives. | "We're going to stay here as long as it takes to get this information," Mr Levin warned the executives. |
In a series of tense exchanges, Mr Levin quizzed Mr Sparks, former head of mortgages, about whether he felt obliged to tell clients when Goldman was betting against investments that he sold. | In a series of tense exchanges, Mr Levin quizzed Mr Sparks, former head of mortgages, about whether he felt obliged to tell clients when Goldman was betting against investments that he sold. |
The senator highlighted one particular investment portfolio that Mr Sparks' own bosses had described in highly derogatory terms. | The senator highlighted one particular investment portfolio that Mr Sparks' own bosses had described in highly derogatory terms. |
Mr Sparks did not respond directly, repeating that the description of the investment product used by his bosses was not his own. | Mr Sparks did not respond directly, repeating that the description of the investment product used by his bosses was not his own. |
Tuesday's hearing is the fourth in a series that is focusing on what lay behind the financial crisis and the collapse of the housing market. | Tuesday's hearing is the fourth in a series that is focusing on what lay behind the financial crisis and the collapse of the housing market. |
This latest hearing focuses on the role of investment banks, and specifically that played by Goldman. | This latest hearing focuses on the role of investment banks, and specifically that played by Goldman. |
'Saddened' | 'Saddened' |
LLOYD BLANKFEIN Chairman and chief executive of world's biggest investment bank, Goldman SachsEarned more than $70m in 2007 - a record for a Wall Street boss. Took home less than $1m in 2009Told magazine interviewer last year "I'm doing God's work". Profile: Lloyd Blankfein Goldman's 150-year reputation on the line | LLOYD BLANKFEIN Chairman and chief executive of world's biggest investment bank, Goldman SachsEarned more than $70m in 2007 - a record for a Wall Street boss. Took home less than $1m in 2009Told magazine interviewer last year "I'm doing God's work". Profile: Lloyd Blankfein Goldman's 150-year reputation on the line |
During five hours of questioning the executives rejected suggestions from the committee that they contributed to the financial crisis. | During five hours of questioning the executives rejected suggestions from the committee that they contributed to the financial crisis. |
"We did not cause the financial crisis.... I do not think that we did anything wrong," said Mr Swenson, who runs Goldman's structured products division. | "We did not cause the financial crisis.... I do not think that we did anything wrong," said Mr Swenson, who runs Goldman's structured products division. |
Mr Tourre said: "I am saddened and humbled by what happened in the market in 2007 and 2008.... But I believe my conduct was proper." | Mr Tourre said: "I am saddened and humbled by what happened in the market in 2007 and 2008.... But I believe my conduct was proper." |
In a statement released ahead of the hearing and later read to the senators, Mr Tourre denied wrong-doing and said he would clear his name in court. | In a statement released ahead of the hearing and later read to the senators, Mr Tourre denied wrong-doing and said he would clear his name in court. |
Mr Tourre, the only individual to be charged, said: "I deny - categorically - the SEC's allegations. And I will defend myself in court against this false claim." | Mr Tourre, the only individual to be charged, said: "I deny - categorically - the SEC's allegations. And I will defend myself in court against this false claim." |
Mr Blankfein also denies that his investment bank bet against its own clients in the US property market. | Mr Blankfein also denies that his investment bank bet against its own clients in the US property market. |
The under-fire banker will argue that Goldman was simply "managing [its] risk" in betting on market falls. | The under-fire banker will argue that Goldman was simply "managing [its] risk" in betting on market falls. |
He will also say that the bank lost $1.2bn (£779m) as a result of the collapse in house prices in 2008. | He will also say that the bank lost $1.2bn (£779m) as a result of the collapse in house prices in 2008. |
Charge disputed | Charge disputed |
Fabrice Tourre: "The transaction was not designed to fail... we lost money too" | Fabrice Tourre: "The transaction was not designed to fail... we lost money too" |
In a text of his prepared testimony, Mr Blankfein said the bank "strongly disagreed" with the SEC's complaint, calling the episode "one of the worst days in my professional life". | In a text of his prepared testimony, Mr Blankfein said the bank "strongly disagreed" with the SEC's complaint, calling the episode "one of the worst days in my professional life". |
"We have been a client-centred firm for 140 years and if our clients believe that we don't deserve their trust, we cannot survive." | "We have been a client-centred firm for 140 years and if our clients believe that we don't deserve their trust, we cannot survive." |
He added that the accusation that the bank made money from bets on market falls ("short" positions) was simply not true. | He added that the accusation that the bank made money from bets on market falls ("short" positions) was simply not true. |
"We didn't have a massive short against the housing market and we certainly did not bet against our clients," he said. | "We didn't have a massive short against the housing market and we certainly did not bet against our clients," he said. |
"Rather, we believe that we managed our risk as our shareholders and our regulators would expect." | "Rather, we believe that we managed our risk as our shareholders and our regulators would expect." |