WASHINGTON – Goldman Sachs officials strongly disputed barbed accusations Tuesday from U.S. senators that the firm cashed in on the housing meltdown by crafting a strategy to bet against home loan securities while misleading its own investors.
The investment bank officials ran into a wall of bipartisan wrath before the Senate panel investigating Goldman's role in the national financial crisis. Democratic Sen. Carl Levin of Michigan accused Wall Street firms of selling securities they wouldn't invest in themselves. That's "unbridled greed in the absence of the cop on the beat to control it," he said.
Democrats hope rising public anger with Wall Street will help them push new financial regulations past Republican objections — a pending overhaul bill that Levin said would "put a cop back on the Wall Street beat."
Among the officials testifying Tuesday was Fabrice Tourre, a 31-year-old Goldman trader who, along with the firm, has been charged with civil fraud by the Securities and Exchange Commission.
The SEC says Tourre marketed securities without telling buyers they were chosen with help from a Goldman hedge fund client that was betting the investments would fail. The commission alleged that Tourre told investors the hedge fund, Paulson & Co., actually bought into the investments.
Tourre testified that he doesn't recall telling investors that.
"I deny — categorically — the SEC's allegation," Tourre said. "And I will defend myself in court against this false claim."
Through hours of questioning, the executives stood their ground. They rejected the senators' accusations that Goldman helped fuel the financial crisis that plunged the country into recession.
"We did not cause the financial crisis. ... I do not think that we did anything wrong," said Michael Swenson, who runs Goldman'sstructured products group trading.
Tourre said: "I am saddened and humbled by what happened in the market in 2007 and 2008. ... But I believe my conduct was proper."
At times, the senators and the witnesses, who have long marketed complex mortgage investments likecollateralized debt obligations, seemed to struggle to explain themselves to the other side. The senators cast Goldman's efforts to bet against securities as a contributor to the crisis. By contrast, the Goldman officials described their use of such trading tools as a way to reduce risks for the company and its clients.
In a brash January 2007 e-mail, Tourre called himself "The fabulous Fab ... standing in the middle of all these complex ... exotic trades he created."
At one point, about a half dozen protesters entered the committee room, dressed in prison stripes with names on signs around their necks of Tourre and Goldman CEO Lloyd Blankfein, who was scheduled to testify later in the day.
"Fabulous Fab is not so fab when he takes from the poor," the protesters spoke as a chorus before the hearing started. "We want to see these guys behind bars." They hissed at times during the testimony.
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