Officials at Goldman Sachs have at least one thing to be happy about this morning as their CEO, Lloyd Blankfein, awaits the grilling of his life before a U.S. Senate committee investigating the firm’s role in the 2008 financial collapse: He is scheduled to testify for just an hour.
At least, that was the word coming from the firm as Blankfein made final preparations to appear before the Senate’s Permanent Subcommittee on Investigations, which late yesterday released another batch of embarrassing emails from the PR-battered firm, including several from Blankfein himself, showing how employees cheered on the mortgage crisis as they sold toxic securities to their clients, and then bet the same bonds would decline in value by "shorting" the market for housing debt.
On Wall Street, of course, there’s nothing illegal about profiting at others' misery, though securities regulators and congressional investigators are looking at how such wild risk taking from Goldman contributed to the 2008 banking crisis, which ultimately led to one of the steepest recessions in a generation. In the end, Goldman, like the rest of Wall Street, needed a massive taxpayer financed bailout to survive.
At Goldman, meanwhile, the focus is on how Blankfein will handle himself before the subcommittee and how he faces likely hostile questions from key senators, including committee chairman Carl Levin, the Michigan Democrat who took the unusual step beginning on Saturday of releasing dozens of emails from Goldman executives and later attacking the firm for profiting so much during the crisis, particularly in 2007. The firm earned more than $11 billion U.S. that year as losses spread just about everywhere else on Wall Street.
People inside Goldman concede that Blankfein is an uneven public figure even as he prepped for hours over the weekend on how to answer questions about his compensation -- he earned nearly $70 million U.S. in 2007, the same year the crisis started -- and his views of Fabrice Tourre, the young Goldman trader at the centre of a recent SEC case, which alleges that Tourre and Goldman committed securities fraud by withholding key details of a batch of toxic mortgage debt sold to clients.
A Goldman spokesman could not be reached for comment.
Late Monday afternoon, Goldman released the written portion of Blankfein’s testimony in which the CEO called the day the SEC filed the civil charges "one of the worst days in my professional life, as I know it was for every person at our firm."
