Goldman Sachs under Microscope: Key Moments from Hearing
Here are several noteworthy interactions from the proceedings:
Levin Questions Daniel Sparks about "Sh**ty" Deal: Sen. Carl Levin, the chairman of the subcommittee, repeatedly sparred with Daniel Sparks, the former head of Goldman Sachs mortgage department, over Goldman selling assets that later failed.
In the first, and harshest exchange, Levin questioned Sparks about sales of Timber Wolf securities and referred repeatedly to a June 22, 2007 e-mail from another Goldman executive to Sparks, which read "boy that [Timber Wolf] was one shitty deal."
Levin questioned why Goldman kept selling Timber Wolf securities after concluding the deal was bad.
"We did trades after that ... Some context might be helpful," Sparks said.
"Let me tell you, the context is mighty clear. June 22, the date of this e-mail. ... How much of that "sh**ty" deal did you sell to your clients after June 22, 2007?" Levin said, as he grew increasingly frustrated with what he perceived as non-answers from Sparks.
McCaskill: "This doesn't make common sense": Sen. Claire McCaskill hammered Fabrice Tourre on Paulson & Co.'s role in recommending securities to ACA, which Tourre insisted had the final say in which mortgages to choose. McCaskill said the Goldman's use of ACA was a "fig leaf" to hide the fact that Paulson was determining which assets to include, which they planned to bet against.
"I need someone to acknowledge that seems weird: That the people Goldman sells transactions to never get to know that Paulson is in the room picking this stuff," she said.
McCaskill asked, "Typically when you make an instrument for a client who wants to bet, do you let them help pick the assets that go into the instruments?"
Tourre replied that the buyer has to be involved in some capacity or else there would be no transaction.
"You understand this doesn't make common sense - that someone who wants to go long would let someone who wants to go short pick the contents," said McCaskill, who added that Goldman was "not only making the market" it was "playing in the market and muck it up."
Is Goldman Responsible for Financial Crisis?: Sen. Mark Pryor, D-Ark., asked the panel whether Goldman's actions, or the witness' actions individually, led to the financial crisis.
Sparks said he didn't have any regrets about his personal actions but said the firm made "poor business decisions in hindsight."
"Credit standards overall got loose, too loose. ... We were participants in an industry that got too loose."
Michael Swenson said Goldman's mortgage desk didn't cause the crisis.
"I do not think we did anything wrong. There's things we would have like to have done better, in hindsight, but I do not think we did anything wrong," he said.
Fabrice Tourre, the only employee named in the SEC fraud case against Goldman said he was "sad and humbled" by what happened in the market, but "I believe my conduct was proper."
Levin chides Sparks for selling "junk": In his second jousting session with Sparks, Sen. Levin questioned the former executive about the bank's Hudson Mezzanine deal, reading an email from a Goldman salesperson in which she said that the client, Allied Irish Bank, was "too smart to buy this junk."
"I didn't believe it was junk. We didn't believe it was a junk. A sales person said that," Sparks said.
"Yes, if a sales person believed it was junk, you were selling junk," Levin replied.
Levin also referred to a Jan. 31, 2007 e-mail, in which Sparks complimented two Goldman employees on "what a great job they did. They structured like mad and traveled the world and worked their tails off to make some lemonade from some big old lemons."
Responding to Sparks' previous assertion that he had no regrets about his personal actions, Levin tersely said "You don't have regrets? You ought to have plenty of regrets."
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