Goldman executives were yesterday forced to deny allegations they misled clients about debt products they knew were destined to fail.
The committee, chaired by senator Carl Levin, quoted a series of embarrassing emails in which Goldman staff referred to one of its products as “crap”, a $1bn collateralised debt obligation (CDO) as “one shitty deal” and praising Goldman traders for making lemonade out of a “whole lot of lemons”.
The involvement of John Paulson, the hedge fund manager who made a fortune betting against the US housing market, in the creating of the CDOs was subject to a lengthy debate. The committee claimed it was unethical for Paulson to be involved in packaging the products and said Goldman should have been more transparent with clients about his involvement.
The committee hinted it may push for legislation that would force investment banks to act in the best interests of their clients.
Throughout the questioning the bank resolutely refused to accept any implication it had acted dishonestly.
Chief executive Lloyd Blankfein claimed Goldman’s actions had been misinterpreted and were simply part of complex banking mechanisms.
Daniel Sparks, former head of the bank’s mortgage unit, summed up Goldman’s position, saying: “Regret, to me, is something you feel when you have done something wrong and I don’t have that.”