Goldman Sachs CEO Lloyd Blankfein faced a blistering cross-examination from U.S. lawmakers over why the investment banks' sales team felt they could sell securities to clients while believing they were crap and betting against them.
Blankfein, who often squinted as if puzzled by the questions and who was frequently interrupted, told a Senate hearing he did not see a problem with a market maker like Goldman taking positions at variance with its clients.
You're going short against the very security (you're selling), said Senator Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations. How do you expect to deserve the trust of your clients, and is there not an inherent conflict here?
Blankfein was the last in a parade of Goldman Sachs Group Inc current and former executives who tried to fend off accusations they inflated the housing bubble, sold clients shitty deals and made billions off the market's collapse.
The current and former employees said Goldman was managing risk on individual positions rather than making a broad bet against the future of the housing market.
Blankfein was last to testify, sworn in over seven hours after the hearing started.
Our clients' trust is not only important to us, it's essential to us, Blankfein insisted. It is why we are a successful firm.
The hearing room was full of protesters, some wearing striped prison outfits, holding pink signs reading SHAME and GOLDMAN BANKSTERs.
The Goldman executives spoke deliberately, but at times looked uncomfortable as they were asked to leaf through massive evidence binders, crammed with emails and other internal Goldman communications.
The executives insisted they took responsibility for their actions, but mostly blamed the housing crisis on broader industry issues, rather than their own conduct.
Former mortgage chief Dan Sparks came the closest to an apology, saying the bank made some poor decisions in hindsight. He added: I don't have any regrets about doing things that I think were improper, but we were participants in an industry that got loose.
Levin told Sparks and other executives, You should have plenty of regrets.
Goldman bond trader Fabrice Tourre said he did not hide material information from clients, in his first public appearance since the Securities and Exchange Commission accused him and Goldman of civil fraud for withholding details of a deal from investors.
Goldman has become a lightning rod for criticism for traders' behavior before and during the financial crisis that peaked in 2008, the worst economic decline since the Great Depression.
The subcommittee has held a series of hearings into the origins of the crisis, buttressing work on a bill to overhaul financial regulation.
The hearings recalled the Pecora Commission hearings that started in 1932 and investigated the causes of the 1929 stock market crash. Those hearings found unethical practices ranging from investors linking up to manipulate stock prices to selling stocks to friends of J.P. Morgan at discounted prices. The head of the commission, Ferdinand Pecora, is often credited with popularizing the word bankster, which combines banker and gangster.
Goldman Sachs shares were up 0.7 percent at $153.04 by the close of trading on Tuesday, defying a drop of about 2 percent in the broader market triggered by downgrades in Greek and Portuguese debt.
(Reporting by Steve Eder and Dan Margolies; Additional reporting by Dan Wilchins in Washington, Jonathan Stempel and Christian Plumb in New York, and Kei Okamura in Tokyo, editing by Tim Dobbyn)