Page last updated at 01:23 GMT, Wednesday, 28 April 2010 02:23 UK

Goldman Sachs' Lloyd Blankfein under fire at hearing

Key moments from the hearing

Goldman Sachs' chief executive has denied his bank contributed to the US financial crisis by betting some of its own investment products would fail.

Lloyd Blankfein and other executives at the Wall Street giant were accused by a US Senate panel of acting unethically, while Americans lost jobs and homes.

Mr Blankfein said clients came looking for risk "and that's what they got".

The hearing comes as the US Congress considers the most sweeping reform of the financial industry since the 1930s.

During hours of hostile questioning on Tuesday, Goldman executives were accused of marketing some investments that the bank's own staff dismissed as "junk".


The highly charged hearing saw fierce argument and occasional obscenities, while protesters, some in striped prison outfits, waved signs reading "shame" and "Goldman banksters".

Mark Mardell
The senators lectured these would-be masters of the universe as if they were school boys caught with their fingers in the jam
Mark Mardell
BBC North America editor

Senator Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations, said Goldman had caused widespread harm to American society.

At the heart of the questioning was how Goldman packaged complex mortgage-backed securities, marketed them to investors - but then bet - or shorted - that these securities would fall in value.

"They're buying something from you, and you are betting against it. And you want people to trust you? I wouldn't trust you," Mr Levin told Mr Blankfein.

The firm's "misuse of exotic and complex financial structures helped spread toxic mortgages throughout the financial system," said Sen Levin.

Lloyd Blankfein
Chairman and chief executive of world's biggest investment bank, Goldman Sachs
Earned more than $70m in 2007 - a record for a Wall Street boss. Took home less than $1m in 2009
Told magazine interviewer last year "I'm doing God's work".

"And when the system finally collapsed under the weight of those toxic mortgages, Goldman profited from the collapse," he added.

Mr Blankfein - who often squinted as if puzzled by the questions and was frequently interrupted - strongly denied any wrong-doing.

The chief executive said clients had wanted an investment that would give them exposure to the housing market.

"Unfortunately, the housing market went south very quickly... so people lost money in it", he said.

But that did not mean Goldman had acted improperly, he insisted.

"Our clients' trust is not only important to us, it's essential to us. That's why we are a successful firm," he said.

Mr Blankfein - who said late last year he was "doing God's work" - was the last of seven past and present Goldman executives to testify.

Former mortgage chief Daniel Sparks came closest to an apology, telling the panel that the bank had "made some poor decisions in hindsight".

Fabrice Tourre, Executive Director, Goldman Sachs Structured Products Group Trading
31-year-old executive director of Goldman Sachs International
Charged with securities fraud for misleading investors
Ran Abacus 2007-ACI, a complex product at heart of regulator's probe. Denies charges
Email refers to him as "the fabulous Fab"

Earlier, Fabrice Tourre - the London-based bond trader named in civil fraud case against the bank - denied misleading investors by selling a financial product that the bank had bet against.

Goldman says the charges brought by the Securities and Exchange Commission are wrong in "fact and law".

Mr Tourre told the Senate panel: "I deny, categorically, the SEC's allegations. And I will defend myself in court against this false claim."

Neither the hearing, nor Tuesday's market turmoil triggered by downgrades in Greek and Portuguese debt harmed Goldman shares.

They were up 0.7% at $153.04 (£100) by close of trading.

Elsewhere at the Capitol, Republicans succeeded for a second day in thwarting moves to debate a bill for sweeping financial reform - the party floated their own proposals.

With Congressional elections in November, Republicans and Democrats have been urging stricter oversight of the financial sector, and analysts expect a bill to pass eventually.

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