By Ben Fractenberg and Michael Ventura
MANHATTAN — Goldman Sachs executives faced a day-long and profanity-laced grilling Tuesday at a Senate subcommittee hearing on whether the Wall Street firm defrauded investors and contributed to the collapse of the nation's economy while reaping huge profits.
Goldman CEO Lloyd Blankfein and a host of other top-level employees at the firm denied they did anything wrong or misled their clients, particularly in a 2007 financial deal known as the Abacus 2007-AC1, which earned a hedge fund billionaire and the bank a hefty fortune while others lost out.
"I have been the target of unfounded attacks on my character and motives," Fabrice Tourre, the Goldman VP who constructed the deal and is the only person named in a Securities and Exchange Commission lawsuit against Goldman, told the Senate Permanent Committee on Investigations.
“I deny — categorically — the SEC.’s allegation," Tourre said at the hearing. "And I will defend myself in court against this false claim.”
Several current and former Goldman officials — including Daniel Sparks, Joshua Birnbaum, Michael Swenson, David Viniar, Craig Broderick, Blankfein and Tourre — took heated questions from senators during the first part of the hearing. At one point subcommittee chairman Sen. Carl Levin, D-MI, accused the testifiers of stalling.
“We’re going to stay here as long as it takes to get the answers,” said Levin.
Levin read company e-mails where Goldman traders described pushing a "s----y deal" onto customers, the New York Post reported. A total of 21 similar vulgarities were uttered by lawmakers during the hearing.
"What do you think of selling securities your own people thought were crap?" Levin asked Blankfein when it was the CEO's turn in front of the subcommittee.
"I think there a lot of options about the way a security will perform," he responded. Blankfein also defended his firm's business and ethical practices.
At issue in the suit is the mortgage deal, where Goldman allegedly let an outside hedge fund manager, John A. Paulson, pick mortgage funds in the investment deal in order to bet against them.
“I believe we have a duty to serve our clients well,” said former Goldman trader Joshua Birnbaum in response to questions from committee member Sen. Susan Collins, R-Maine. “And I believe we did.”
The subcommittee took the suit a step further charging that Goldman crafted a series of deals, including selling risky securities like Timberwolf, meant to reap profits off the floundering mortgage market.
Public outrage against investment banks like Goldman and the broader financial industry remains high.
49 percent of Manhattan registered voters said Wall Street is “more of the problem” when thinking about the economy, an April 27, 2010 Marist Poll stated. 31 percent said it is “more of the solution.”
“People feel like you are betting with other people’s money and other people’s future,” said Sen. Mark Pryor, D-AR, at the hearing. “Instead of Wall Street, it looks like Las Vegas.”