The masters of the universe were forced down to earth on Tuesday.
Goldman Sachs Group Inc chief executive Lloyd Blankfein, the head of the most powerful investment bank in the world, faced a blistering cross-examination from US lawmakers about the company’s ethics and behavior toward its clients.
Blankfein conceded in the final hours of a nearly 11-hour hearing that the criticism of his firm would lead to soul searching.
PHOTO: REUTERS
He said: “Everything that’s been the subject of criticism will be tightened up,” an indication that the pressure on Wall Street may be starting to change behavior.
Blankfein, who was quoted late last year as saying he was “doing God’s work,” was asked time and time again whether it was morally correct for the bank to sell clients securities, while at the same time the firm was betting against them.
“You shouldn’t be selling junk. You shouldn’t be selling crap. You shouldn’t be betting against your own customer at the same time you’re selling to them,” Senator Carl Levin said.
PHOTO: REUTERS
“You’re going short against the very security [you’re selling] ... many of which are described as crap by your own sales force internally,” said 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 current and former executives who tried to fend off accusations they helped inflate the housing bubble and then made billions off the market’s collapse.
The hearing starkly illustrated the conflict between Washington and Wall Street over blame for the financial crisis and resistance to some of the key financial reforms the Obama administration is trying to push through Congress.
Blankfein was frequently interrupted, told to answer the question and stick to the point. He often squinted as if puzzled by the questions and sometimes gave hesitant answers.
He said, as a market maker, it was not Goldman’s responsibility to tell customers how to trade or invest.
Clients “are not coming to us to represent what our views are, they probably wouldn’t care what our views are. They shouldn’t care.”
The hearing came less than two weeks after the US Securities and Exchange Commission (SEC) filed a civil fraud suit against Goldman, charging that it hid vital information from investors about a mortgage-related security.
Despite the hearing, Goldman Sachs shares were up 0.7 percent at US$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.
Blankfein’s testimony came after the close of normal trading hours.
Goldman bond trader Fabrice Tourre, the only individual named in the SEC suit, said he did not hide material information from clients.
Senator Tom Coburn, the top Republican on the subcommittee, accused Goldman of making Tourre “a whipping boy” and questioned the firm’s motivation for releasing personal e-mails from 2007 between Tourre and his girlfriend.
Blankfein stammered through his response, saying: “There were elements here that spoke badly to the firm and we just wanted to come abreast of all the issues about which were bad to the firm.”
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.
The Goldman executives spoke deliberately, but at times looked uncomfortable as they were asked to leaf through massive evidence binders, crammed with e-mails 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 close to an apology, saying the bank “made some poor decisions in hindsight.”
“I don’t have any regrets about doing things that I think were improper, but we were participants in an industry that got loose,” he said.
Levin told Sparks and other executives: “You should have plenty of regrets.”
Levin closed the hearing by taking a final jab at Goldman for complaining that the committee cherry-picked from the company’s internal e-mails and other documents.
“That book in front of you is a whole bowl of cherries,” Levin said pointing at Blankfein and the evidence book. “These are not cherry-picked. Those documents reflect the history of what happened here.”
‘CROWN JEWEL’: Washington ‘can delay and deter’ Chinese President Xi Jinping’s plans for Taiwan, but it is ‘a very delicate situation there,’ the secretary of state said US President Donald Trump is opposed to any change to Taiwan’s “status quo” by force or extortion and would maintain that policy, US Secretary of State Marco Rubio told the Hugh Hewitt Show host on Wednesday. The US’ policy is to maintain Taiwan’s “status quo” and to oppose any changes in the situation by force or extortion, Rubio said. Hewitt asked Rubio about the significance of Trump earlier this month speaking with Taiwan Semiconductor Manufacturing Co (台積電) chairman C.C. Wei (魏哲家) at the White House, a meeting that Hewitt described as a “big deal.” Asked whether the meeting was an indication of the
‘RELATIVELY STRONG LANGUAGE’: An expert said the state department has not softened its language on China and was ‘probably a little more Taiwan supportive’ China’s latest drills near Taiwan on Monday were “brazen and irresponsible threats,” a US Department of State spokesperson said on Tuesday, while reiterating Washington’s decades-long support of Taipei. “China cannot credibly claim to be a ‘force for stability in a turbulent world’ while issuing brazen and irresponsible threats toward Taiwan,” the unnamed spokesperson said in an e-mailed response to media queries. Washington’s enduring commitment to Taiwan will continue as it has for 45 years and the US “will continue to support Taiwan in the face of China’s military, economic, informational and diplomatic pressure campaign,” the e-mail said. “Alongside our international partners, we firmly
KAOHSIUNG CEREMONY: The contract chipmaker is planning to build 5 fabs in the southern city to gradually expand its 2-nanometer chip capacity Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, yesterday confirmed that it plans to hold a ceremony on March 31 to unveil a capacity expansion plan for its most advanced 2-nanometer chips in Kaohsiung, demonstrating its commitment to further investment at home. The ceremony is to be hosted by TSMC cochief operating officer Y.P. Chyn (秦永沛). It did not disclose whether Premier Cho Jung-tai (卓榮泰) and high-ranking government officials would attend the ceremony. More details are to be released next week, it said. The chipmaker’s latest move came after its announcement earlier this month of an additional US$100 billion
Authorities yesterday elaborated on the rules governing Employment Gold Cards after a US cardholder was barred from entering Taiwan for six years after working without a permit during a 2023 visit. American YouTuber LeLe Farley was barred after already being approved for an Employment Gold Card, he said in a video published on his channel on Saturday. Farley, who has more than 420,000 subscribers on his YouTube channel, was approved for his Gold Card last month, but was told at a check-in counter at the Los Angeles International Airport that he could not enter Taiwan. That was because he previously participated in two
RSS