Goldman's Top Rung Said to Have Overseen Mortgage Unit

The New York Times has a story out Sunday night asserting that senior executives at Goldman Sachs played "pivotal" roles in overseeing the mortgage unit that's at the heart of the civil fraud lawsuit filed against the company by the Securities and Exchange Commission.

How far up the ranks did this go? So far, only company vice-president Fabrice Tourre has beenv named in the complaint, but the Times article suggests that the affair goes right to the top of the company org chart. According to the piece, it include:

...executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation's economy. It was Goldman's top leadership, these people say, that finally ended the dispute on the mortgage desk by siding with those who, like Mr. Tourre and Mr. Egol, believed home prices would decline. (Egol refers to Jonathan M. Egol, whom the Times describes as "the mastermind behind the controversial mortgage deals known as the Abacus investments.")

By early 2007, the Times says that Goldman's mortgage unit "had captured the attention of senior management" including Blankfein, Gary D. Cohn, the company's president, and David A. Viniar, the chief financial officer, who reported visited the mortgage unit often.

Such high-level involvement was unusual elsewhere on Wall Street, where many executives spent little time learning the workings of their mortgage businesses or how those businesses might endanger their companies. The decision to get rid of positive bets on mortgages turned out to be prescient. Unlike most other Wall Street banks, Goldman profited from its mortgage business as the housing bubble was inflating and then again when the bubble burst.

Separately, Vanity Fair contributing editor Vicky Ward came up with a related news nugget to add to the Goldman file: Apparently, the former head of asset manager ACA Capital, one of the key players in the SEC's Goldman chronology, shared a house purchased with the investment bank's deputy general counsel. The question Ward raises is whether the relationship was disclosed to any third parties. Is that an important fact or just a curiosity? Beats me, though the SEC claims that ACA was involved in selecting the securities which went into the CDO known as Abacus 2007- AC1 - along with hedge fund manager John Paulson, who decided what investments should go into the offering. As has been chronicled elsewhere, Paulson went on to make a small fortune by shorting the trade.

If more stories like this come to light, a heretofore little-known Goldman vice-president will not be the only company exec facing the fire.

  • Charles Cooper On Twitter»

    Charles Cooper is an executive editor at CNET News. He has covered technology and business for more than 25 years, working at CBSNews.com, the Associated Press, Computer & Software News, Computer Shopper, PC Week, and ZDNet. E-mail Charlie.

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