Asia-Pacific

Goldman CEO denies wrongdoing in crisis

(Agencies)
Updated: 2010-04-28 06:33

Fabrice Tourre, executive director, Goldman Sachs Structured Products Group Trading, prepares to testify on Capitol Hill in Washington, Tuesday, April 27, 2010, before the Senate Investigations subcommittee. [Agencies]

WASHINGTON - The CEO of Goldman Sachs is testily defending his company's ethics and business practices during the nation's financial crisis, saying that customers buying securities from the investment house came looking for risk and that's what they got.

Lloyd Blankfein told a Senate investigatory panel that clients wanted a security that would give them exposure to the housing market. He said that "unfortunately, the housing market went south very quickly ... so people lost money in it."

Blankfein was the final witness in a daylong hearing on Goldman Sachs' behavior leading up to a government civil fraud charge earlier this month.

While the famous firm fights for its reputation, senators said the company's behavior leading up to the financial crisis clearly demonstrated a need for stronger regulation, and Democrats hoped to use the daylong hearing to build support for legislation now before the Senate. Republicans have so far succeeded in blocking debate, but more test votes are expected.

The legislation would crack down on the kind of lightly regulated housing market investments that helped set off the crisis in 2007.

Through hours of testimony to a Senate investigative subcommittee, present and former Goldman officials disputed, sometimes testily, the Securities and Exchange Commission's recent fraud allegations against the company.

They strongly denied that the firm cashed in on the housing crash by crafting a strategy to bet against home loan securities while misleading its own investors.

"I will defend myself in court against this false claim," said Fabrice Tourre, a French-born 31-year-old Goldman trader who, along with the firm, was charged with civil fraud by the SEC. "I deny — categorically — the SEC's allegation."

Investors seemed unimpressed by the tough talk at the Capitol: Goldman's stock rose $1.01 per share, to $153.04, on Tuesday, a day in which the Dow Jones industrials had their worst drop in nearly three months, down 213 points.

At the hearing, senators from both parties verbally pounded the Goldman executives, accusing them of financial gambling that helped nearly derail the entire U.S. economy.

"As we speak, lobbyists fill the halls of Congress, hoping to weaken or kill legislation aimed at reforming these abuses," said Sen. Carl Levin, D-Mich., the panel's chairman. "Wall Street is on the wrong side of this fight."

Levin 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.

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