Goldman execs grilled on the hill
WASHINGTON — The CEO of Goldman Sachs and other executives from the Wall Street powerhouse are coming before Congress 10 days after the government accused the firm of fraud. The Senate panel hearing their testimony today alleges that Goldman used a strategy that allowed it to profit from the housing meltdown and reap billions at the expense of clients.
Goldman executives misled investors in complex mortgage securities that turned toxic, investigators for the Senate subcommittee say. They point to a trove of some 2 million e-mails and other Goldman documents obtained in an 18-month investigation. Excerpts from the documents were released Monday, a day before the hearing bringing CEO Lloyd Blankfein and the others before the Senate Permanent Subcommittee on Investigations.
Blankfein says in his prepared testimony that Goldman didn't bet against its clients and can't survive without their trust.
Also appearing today: Fabrice Tourre, a Goldman trading executive who, federal regulators say, marketed an investment designed to lose value. Tourre who famously called himself in a January 2007 e-mail "The fabulous Fab ... standing in the middle of all these complex, ... exotic trades he created."
The Securities and Exchange Commission this month filed a civil fraud case against Goldman, saying it misled investors about securities tied to home loans. The SEC says Goldman concocted mortgage investments without telling buyers they had been put together with help from a hedge fund client, Paulson & Co., that was betting on the investments to fail. The agency also charged Tourre. Goldman disputes the charges and says it will contest them in court.
At the hearing, Blankfein will repeat the company's assertion that it lost $1.2 billion in the residential mortgage meltdown in 2007 and 2008 that touched off the financial crisis and a severe recession.
He also will argue that Goldman wasn't making an aggressive negative bet — or short — on the mortgage market's meltdown.
