Lloyd’s bad day
Goldman Sachs CEO Lloyd Blankfein today will tell a Senate subcommittee that being sued by the Securities and Exchange Commission was “one of the worst days in my professional life” as he tries to refute allegations his firm profited from the subprime-mortgage crisis.
“Much has been said about the supposedly massive short Goldman Sachs had on the US housing market,” Blankfein will say at today’s hearing, according to his prepared statement released yesterday. “The fact is we were not consistently or significantly net ‘short the market’ in residential mortgage-related products in 2007 and 2008.”
Blankfein is also expected to assert that Goldman lost $1.2 billion between 2007 and 2008, challenging a central theme behind the SEC’s fraud case and today’s hearing of the Senate Subcommittee on Permanent Investigations — that Goldman systematically sought to generate huge profits from the collapse of the subprime mortgage market.
The Goldman Sachs boss is one of two star witnesses expected to testify before the subcommittee about the gold-plated bank’s activities during the meltdown. Also expected to give testimony is Goldman Vice President Fabrice Tourre, a trader at the heart of the SEC’s case against the bank.
Blankfein’s statement comes as more details are emerging about the nature of the questions Blankfein and Tourre will face at today’s hearing.
Following an 18-month investigation into the bank, the subcommittee is expected to conclude that Goldman orchestrated a plan to pocket billions from the housing collapse at the expense of their clients.
Top Goldman execs misled investors in complex mortgage investments that became toxic, investigators said, citing e-mails and other documents gathered in the probe. A taste of those e-mails was released over the weekend, and they portray Goldman brass cheering on the housing meltdown, and the money the bank pocketed.
The subcommittee’s conclusions come a little more than a week after the SEC sued the bank claiming it and Tourre misled investors about billionaire John Paulson’s involvement in putting together a collateralized debt obligation.
As part of the two-page statement he’ll read today, Blankfein will seek to justify Goldman’s culture by stressing that the bank’s 35,000 employees “are hard-working, diligent and thoughtful,” and that contrary to their image of being greedy, the bank works with pension funds, labor unions and university endowments “to help build and secure their assets for generations to come.”
However, Blankfein’s testimony also includes an admission that the bank should have been clearer about how much it needed to disclose to its highly sophisticated investors, while at the same time underscoring that he believes Goldman did nothing wrong.
“We have to do a better job of striking the balance between what an informed client believes is important to his or her investing goals and what the public believes is overly complex and risky,” Blankfein will say in his testimony.
“What we and other banks, rating agencies and regulators failed to do was sound the alarm that there was too much lending and too much leverage in the system — that credit had become too cheap.” mark.decambre@nypost.com