We can’t say we’re surprised that a Senate report released yesterday, that details what caused the financial crisis, focuses on Goldman Sachs. A lot.The findings of a two-year analysis “trains much of its ire on Goldman Sachs, which Sen. Levin said deceived some clients by betting against home loans in 2006 and 2007, while simultaneously selling mortgage securities,” the WSJ reported.
But Levin thinks Goldman deceived more than its investors.
During his press conference, Levin said he thinks Goldman executives weren’t truthful during congressional hearings last year and he “said he would refer the testimony to the Justice Department for possible perjury charges,” according to Bloomberg (via the Washington Post).
“In my judgment, Goldman clearly misled their clients and they misled the Congress,” Levin said during the briefing. He didn’t offer details.
The bank said the testimony was “truthful and accurate.”
Honing in on Goldman Sachs
The report, put together by the Senate’s Permanent Subcommittee on Investigations — a panel headed by Senator Levin — looks at a number of financial firms and events in the lead up to 2008, but pays particular attention to Goldman Sachs.
The report alleges that Goldman-structured CDOs “misled investors and created conflicts of interest as the company built short positions before the U.S. housing market collapsed.”
According to the WSJ, the report includes certain vignettes, including a December 2006 meeting in which Goldman executives met in a conference room next to CFO David Viniar’s office, and determined to cut bullish investments on mortgage bonds.
The account then claims the bank “undertook a multibillion dollar series of trades to hedge its bullish bets by selling mortgage-related trades to allegedly unsuspecting investors.”
From the WSJ,
The head of Goldman’s mortgage unit recommended managers of Goldman’s sales force issue “ginormous” sales credits to those who could find investors anywhere in the world. A Goldman executive found one in Australia. On April 26, 2007, in an email with the subject line “utopia,” the executive said, “I think I found white elephant, flying pig, and unicorn all at once.”
A month later, another Goldman executive lamented his firm’s reputation after a stretch of risky mortgage deals Goldman had sold. He described debt managers that worked with the firm as “street wh— managers.”
“It pains me to say it but citi, ubs, db [Deutsche Bank], lehman, and ms [Morgan Stanley] have much stronger franchises—among large dealers only ML [Merrill Lynch] is more reviled than [Goldman’s] business,” the executive wrote.
Of course no-one can forget Senator Levin’s horror during Goldman’s congressional testimony last year, in which the Abacus scandal was a major focus, and he used the word “shitty” over and over again on live TV, so the focus on Goldman isn’t unexpected.
The report also zooms in on Washington Mutual and Deutsche Bank.