Banking/Financial Institutions

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."  Read more...

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. Read more...

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. 

Daniel Sparks, the former Goldman Sachs partner appearing before the Senate Investigations Committee about the bank's role in misleading investors on mortgage-backed securities, spent 15 minutes appearing confused by a question posed by Sen. Carl Levin (D-Mich.). 

The questioned focused on whether Sparks believed the bank should have told investors that the firm was betting against investments the investor held. 

The senator eventually gave up trying to get an answer from Sparks and moved on to another question.

In testimony before the Senate Investigations Committee, former Goldman Sachs executive Joshua Birnbaum said he was never instructed by his bosses to shift his investment strategy so the bank could reap billions in betting against the success of mortgage-backed securities. 

"No one from senior management told me to make a directional bet against the subprime market," he said. "Rather, during the 2006-2007 period, regardless of whether our books were long or short, the consistent theme from management was to reduce risk in our books." 

Birnbaum's remarks strikes at the heart of an argument posed by Sen. Carl Levin (D-Mich.), who believes the bank took a directional shift in investment strategy to profit from the mortgage fallout. 

Levin will likely address Birmbaum's comment during the question-and-answer section of the hearing. 

Fabrice Tourre, the sole Goldman Sachs executive named by the SEC for defrauding investors, denied any involvement in misleading investors on the soundness of mortgage-backed securities that initially merited high returns, but eventually turned toxic. 

"I deny -- categorically -- the SEC's allegation," he said in testimony before the Senate Investigation Committee. "And I will defend myself in court against this false claim."

House Majority Leader Steny Hoyer (D-Md.) criticized Senate Republicans for blocking debate on financial reform legislation. 

"I am extremely disappointed that Republicans have once again blocked progress for middle-class Americans," he said in prepared remarks. "To a person, Senate Republicans showed that they are continuing to put the interests of Wall Street above those of Main Street, just as House Republicans did when they voted against Wall Street reform in the House."  Read more...

Sen. Byron Dorgan (D-N.D.) said Monday he will introduce legislation banning part of the multitrillion-dollar market for financial derivatives.

Dorgan said he will offer an amendment to the broad financial overhaul package, now pending in the Senate, that would prohibit "naked" credit defaults swaps. 

The market for credit default swaps has been widely blamed for exacerbating the financial crisis. Credit default swaps are derivatives tied the potential for default of an underlying asset. A "naked" swap is one in which the parties do not hold a stake in the underlying asset.

"I'm interested in offering an amendment that bans naked credit default swaps. You know what a naked credit swap is? That's one that has no insurable interest on either side. It's just flat out betting rather than investing," Dorgan said.