Leading executives of the investment bank Goldman Sachs, which is regarded as highly successful on Wall Street, testified for ten hours before the U.S. Congress on Tuesday regarding their role in the 2007 real estate market crash and the severe recession that followed.
In one of the most closely followed congressional hearings related to the financial crisis, key figures from Goldman Sachs denied all allegations arising from the Senate investigation. The investigation found that the bank sold hundreds of millions of dollars in securities backed by subprime mortgages in 2007, while simultaneously betting that these securities would significantly lose value. Among those who testified was Fabrice Tourre, a Goldman Sachs trader who is at the center of a civil lawsuit by the Securities and Exchange Commission (SEC) against Goldman for fraud, related to one of the financial derivatives he helped create. "I categorically deny the SEC’s allegations, and I will defend myself in court against these false claims," said the thirty-one-year-old Tourre during the hearing before the Senate Permanent Subcommittee on Investigations.
Democratic Senator Carl Levin, chairman of the subcommittee, stated that Goldman was a major player in the collapse of the subprime mortgage market, reflecting "unchecked greed" on Wall Street in the years leading up to the financial crisis. "I know you will talk about risk reduction. However, you made billions betting against the value of the securities you sold," Levin told Goldman’s Chief Financial Officer David Viniar. Levin aggressively questioned Goldman’s CEO Lloyd Blankfein about betting against the securities backed by subprime mortgages that the company sold, without informing investors about it.
