Senate Republicans have blocked a financial overhaul bill for the second day in a row.
Goldman Sachs stock survived the Senate grilling of its executives relatively unscathed on Tuesday.
Up more than 1 percent throughout most of trading on Tuesday, Goldman shares gained a little more than half a percentage point while the Dow Jones Industrial Average sank nearly 2 percent. The action occurred while the firm's leaders testified before the Senate Permanent Subcommittee on Investigations.
Goldman executives denied that their firm played a role in the 2008 financial crisis. They also collectively said they didn't do anything wrong in responding to a lawsuit filed nearly two weeks ago by the Securities and Exchange Commission that charges the firm defrauded its customers.
Two Senate leaders agree that a financial regulatory reform bill isn't finished but they disagree about how to ready it for passage.
Senate Majority Leader Harry Reid (D-Nev.) vowed an open amendment process if Republicans will agree to begin debate on the measure.
Whereas Senate Minority Leader Mitch McConnell (R-Ky.) has taken a closer look at the legislation and wants it tightened before starting debate.
"It's not a finished product but it's certainly ready for prime time," Reid told reporters after the party lunches. "We've worked on this bill for weeks and weeks and we can't solve problems if we're not willing to talk about them."
Congress needs to act soon on financial reform legislation and shouldn't leave changes up to the banks, Treasury Secretary Tim Geithner said Tuesday.
The legislation under consideration in the Senate would end taxpayer-financed bailouts and the mentality of 'too big to fail,' Geithner said during The Middle Class Task Force in Milwaukee, Wis.
"This is an important and just cause," he said. "It requires reform. Not small changes at the margin, but comprehensive change, clear rules with teeth, enforced by people who care."
Considerable progress has been made during the past couple of days especially on 'too big to fail' provisions, Senate Banking ranking member Richard Shelby (R-Ala.) told reporters Tuesday
With the parade of cloture votes on the agenda, including the second today at 4:30 p.m., Shelby said talks still need to continue on regulating the over-the-counters derivatives market and a proposed consumer protection agency that would be set up within the Federal Reserve.
If Democrats would "meet us halfway we could get a bill," Shelby told reporters.
Shelby wouldn't elaborate on any possible changes to the measure but said Democrats were considering several GOP recommendations on 'too big to fail.'
Daniel Sparks, a former Goldman Sachs partner, told the Senate investigations subcommittee that disclosure requirements varied when selling products to investors.
Since mortgage-backed securities were peddled by "market makers," there was no need to tell investors that Goldman had bet against the very product they were being sold.
"Market making itself, as long as people know what they are investing in, I don't think that knowledge of the position of their counter party is something that has to be disclosed and I don't think it currently is disclosed by market makers," Sparks said, adding, "we're [Goldman's] position isn't going to affect how that instrument performs."
Goldman Sachs executives appearing before the Senate investigations committee said their bank played no role in the collapse of the financial market."We did not cause the financial crisis," said Michael Swenson, a managing director at the firm. "I do not think we did anything wrong."
Fabrice Tourre, the sole Goldman Sachs executive named in an SEC fraud case against the bank, told lawmakers a part of a Senate investigation committee that he regretted sending personal emails that predicted the collapse of mortgage-backed securities he managed.
"I regret those emails," he told the committee. "They reflect very badly on the firm and on myself. And I wish I hadn't sent them."In private emails from Tourre and released by Goldman Sachs, he said "the entire system is about to crumble at any moment" and that decision makers at the firm were unaware of the "monstrosities" they created by transforming subprime loans into investment vehicles.
Sen. Carl Levin (D-Mich.) warned Goldman Sachs executives appearing before his committee that he would buffet their plan to stonewall senators' questions by keeping them at the witness table until he and other members were satisfied with their answers.
"It [the stonewalling] is not going to work," he said. "We will stay here for as long as it takes."
Since the question-and-answer period of the hearing began, witnesses have repeatedly acted confused by the questions posed by senators and asked for them to be repeated several times. In most cases, the senators have become frustrated and moved on to other questions, which also were not answered.
Sen. Susan Collins (R-Maine) on Tuesday asked Goldman Sachs executives at the Senate Investigations Committee if they believed they had a duty to work on their clients' behalf. Joshua Birnbaum, former managing director at the bank, was the only witness to answer the question.
"Not only do I believe that we do, I believe that we did," he said.
The other executives either acted confused by the question or said their responsibility ended with supplying clients with rudimentary information about their investments.
Collins was visibly frustrated by the stonewalling. She also inferred that the witnesses were purposely slow in their response to keep from answering the questions posed by senators.