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Goldman Sachs attacked at hearing | Goldman Sachs attacked at hearing |
(about 2 hours later) | |
Past and present executives at Goldman Sachs have faced hours of hostile questioning during a hearing into the causes of America's financial meltdown. | |
Goldman was accused of putting its own interests before those of clients as it marketed some investments that the bank's own staff dismissed as "junk". | |
Senator Carl Levin, chairman of the hearing, spoke of the reckless greed that had infected Wall Street. | |
But Goldman executives defended their actions and denied any wrongdoing. | |
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. |
Toxic mortgages | |
He and the other members of the Senate Permanent Subcommittee on Investigations then grilled the men over their actions and attitudes - and whether Goldman contributed to the financial crisis. | |
MARDELL'S AMERICA 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 class="" href="http://www.bbc.co.uk/blogs/thereporters/markmardell/2010/04/goldman_the_grilling_continues.html">Read Mark's blog in full | |
At heart of the questioning was how Goldman packaged complex mortgage-backed securities and then sold them to investors, knowing that the housing market was about to collapse. | |
The firm's "misuse of exotic and complex financial structures helped spread toxic mortgages throughout the financial system," said Sen Levin. | |
"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 included Fabrice Tourre, Daniel Sparks, Joshua Birnbaum, Michael Swenson, David Viniar and Craig Broderick. | |
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". class="" href="/2/hi/business/8646146.stm">Profile: Lloyd Blankfein class="" href="/2/hi/business/8646264.stm">Goldman's 150-year reputation on the line | |
Lloyd Blankfein, the firm's chief executive, was the final witness to be called by the panel on Tuesday. | |
He said clients had wanted an investment that would give them exposure to the housing market, adding "unfortunately, the housing market went south very quickly... so people lost money in it". | |
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. |
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 charges Referred to himself as "the fabulous Fab" in an e-mail Goldman: 'Fab' Tourre's emails Was what they did really wrong? | |
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. |
Although he firmly resisted Mr Levin's allegations of wrong-doing, Mr Sparks came closest to an apology, admitting that the bank "made some poor decisions in hindsight." | |
Interest in the hearing was heightened by news earlier this month that the Securities and Exchange Commission has filed civil fraud charges against Goldman and Mr Tourre. | |
The SEC alleges that Goldman 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". | |
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". | |
Fabrice Tourre: "The transaction was not designed to fail... we lost money too" | |
But he said that Goldman's actions had reverberated around America and helped fuel the financial crash. | |
The executives rejected this. "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, the only individual to be charged by the SEC, said: "I deny - categorically - the SEC's allegations. And I will defend myself in court against this false claim." | |
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. |