Senators Get Tough With Goldman Sachs Execs

Posted April 27, 2010 at 1:50pm

Senators from both parties took after current and former Goldman Sachs executives on Tuesday, charging during a high-profile hearing that they engaged in abusive practices to increase profit margins while the nation’s economy plummeted.

“Goldman Sachs didn’t just make money, it profited by taking advantage of its clients’ reasonable expectation that it would not sell products that it didn’t want to succeed,” said Sen. Carl Levin (D-Mich.), chairman of the Homeland Security and Governmental Affairs Subcommittee on Investigations.

Sen. John McCain (R-Ariz.), surveying hundreds of pages of e-mails from Goldman Sachs’ executives detailing controversial business dealings, offered a harsher rebuke.

“I don’t know if Goldman Sachs has done anything illegal … but there’s no doubt their behavior was unethical and the American people will render a judgment as well as the courts,” McCain argued.

Tuesday’s hearing, which began at 10 a.m. and could stretch late into the evening, was the culmination of an 18-month probe of Goldman Sachs’ business practices in the years leading up to the 2008 housing crisis. Levin released hundreds of embarrassing e-mails — including one exchange between Goldman employees describing a “shitty deal” — and repeatedly asked witnesses whether they recklessly harmed clients by selling mortgage-backed products.

Goldman Sachs, which last week was charged with fraud by the Securities and Exchange Commission, has reported high profit margins in recent years while competitors have closed or taken huge losses. Lloyd Blankfein, CEO of Goldman Sachs who is scheduled to appear at the hearing this afternoon, is expected to say in prepared testimony that his firm did not knowingly sell bad products to clients in order to boost profits.

Former and current Goldman executives testifying earlier in the day offered vague testimony on company dealings, prompting negative reactions from Senators on the panel.

“I’m starting to share the chairman’s frustration and I’m only 30 seconds into my time,” Sen. Susan Collins (R-Maine) said after an exchange with Daniel Sparks, the former head of Goldman’s mortgage department.

Collins is considered a potential “yes” vote on financial regulatory reform legislation, although so far she has held firm against it and maintained that a bipartisan agreement should be reached before the Senate brings the bill to the floor.

Still, at Tuesday’s dramatic hearing, Collins’ remarks may have given hope to Democrats searching for an elusive 60th vote for a bill.

“Clearly, this system must be reformed so that Wall Street banks are not seen and do not act as unscrupulous operators who seek to profit from the public’s misfortune even as they’re pitching toxic investments and even as hard-working, struggling taxpayers are left to pick up the tab,” Collins said.

The Senate is scheduled to vote again Tuesday afternoon on a key procedural motion that would allow the financial reform bill to be debated on the floor. Democrats failed to secure the 60 votes they needed on Monday to bring the measure to the floor.