Senate Panel To Hear From Goldman Sachs Executives Goldman Sachs executives face a Senate panel that's looking at the causes of the financial crisis Tuesday. Subcommittee Chairman Sen. Carl Levin accuses the company of profiting from the crisis, even as it sold some of the risky investments that brought on the collapse. The Securities and Exchange Commission recently filed fraud charges against Goldman. At issue is whether Goldman mislead investors.
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Senate Panel To Hear From Goldman Sachs Executives

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Senate Panel To Hear From Goldman Sachs Executives

Senate Panel To Hear From Goldman Sachs Executives

Senate Panel To Hear From Goldman Sachs Executives

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Goldman Sachs executives face a Senate panel that's looking at the causes of the financial crisis Tuesday. Subcommittee Chairman Sen. Carl Levin accuses the company of profiting from the crisis, even as it sold some of the risky investments that brought on the collapse. The Securities and Exchange Commission recently filed fraud charges against Goldman. At issue is whether Goldman mislead investors.

RENEE MONTAGNE, host:

It's MORNING EDITION from NPR News. I'm Renee Montagne.

STEVE INSKEEP, host:

And I'm Steve Inskeep. Good morning.

Executives of Goldman Sachs�face another week of bad publicity. Weeks after the federal government sued Goldman, its leaders testify before the Senate this week. The chairman at the hearing will be Democrat Carl Levin of Michigan.

He's accusing the company of profiting from the crisis, even as it sold some of the risky investments that brought on the collapse. And he released some information over the weekend. NPR's Yuki Noguchi is following this story. She's with us live.

Yuki, Good morning.

YUKI NOGUCHI: Good morning, Steve.

INSKEEP: I suppose, given the disclosures over the weekend, Goldman executives are going to know what to expect here.

NOGUCHI: Yes, very much so. I mean, Senator Levin has accused, as you say, Goldman Sachs of magnifying the crisis by shorting, or betting against, the mortgage market. And, of course, that's where the whole crisis started. To make his point, on Saturday, Levin released these four emails, mostly from 2007. And those show that executives were talking about, you know, trying to make money as the economy hit the skids.

INSKEEP: You mean, basically trying to make sure that they profit even if the economy goes down?

NOGUCHI: Well, that's the picture that you get if you read these four emails. And you know, in one of them, the CEO, Lloyd Blankfein, talks about - you know, we lost money, but we also made more than that because of these shorts.

Now, it's true, Goldman Sachs was ahead of the curve in terms of seeing the crisis coming. But Levin's point is that, you know, Goldman created these securities even as the economy - even as they were betting against them.

INSKEEP: Now, you used the term shorts, which, of course, is short selling, which is betting on a market that you think is going down. And that raises a question, I would think. Because isn't the whole point of a firm like Goldman to try to make money whether the market goes up or down? I wonder what their response is to these accusations.

NOGUCHI: Well, Goldman, you know, they hit back. I mean, they're saying that the committee is just flat wrong because, you know, Goldman actually ended losing over a billion dollars of mortgage-related investments. So basically they're saying, hey, you know, if we were that duplicitous, you know, you'd have thought we made money on this. But we didn't.

And they're also saying that the subcommittee cherry-picked these emails. So they released their own trove of emails. And those emails sort of suggest that actually, Goldman executives were trying to protect themselves as the market was going down rather than trying to - sort of bilk investors.

But you know, Steve, either way, we're talking about a handful of emails out of 20 million or something. So both sides are going to be doing some cherry picking here.

INSKEEP: I'm sure we're going to get thousands more words, though - tomorrow especially - as one of the central figures testifies in the SEC investigation of Goldman Sachs.

NOGUCHI: Yes, you're talking about Fabrice Tourre. He is one of the executives who's going to testify. He's 31 years old. He's a banker of some pretty colorful emails, in which he calls himself Fabulous Fab. And...

INSKEEP: Fabulous Fab?

NOGUCHI: Fabulous Fab...

INSKEEP: OK, good.

NOGUCHI: ...as he refers to himself.

INSKEEP: All right.

NOGUCHI: Yes. And he is the guy who put together this deal, where a Goldman client picks securities for an investment and, you know, but this client was on the other - he was betting against the investment. So that investors who actually invested in it lost money while he made money.

INSKEEP: The suggestion here being that somebody was basically on both sides of that deal. That Goldman allowed a man to -

NOGUCHI: But the issue is really the disclosure, and that's what the SEC is concerned about in this case. And you know, Goldman is fighting those charges as well.

INSKEEP: What about the timing of this? I can't help but notice that financial reform is before the Senate this week, even as this hearing comes up.

NOGUCHI: Absolutely. I mean, pinning Goldman as the bad guy, you know, whether these arguments turn out to have merit or not, has definitely strengthened support for the financial reform bill. And it's certainly made it harder to argue against it.

You know, the Senate's bill is going to change rules on lending, investing and executive compensation. And you know, yesterday, key senators on the committee - Christopher Dodd and Richard Shelby - said they're really close to a deal, and they're hoping to open the debate and voting process today.

INSKEEP: Although there continue to be protests from Republicans. This could still be a close vote, or a contentious vote.

NOGUCHI: Yes, it could. It's still, you know, very much up in the air at this point as to the timing. But it's moving forward.

INSKEEP: Yuki, thanks very much.

NOGUCHI: Thank you.

INSKEEP: That's NPR's Yuki Noguchi.

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