Potty Mouths: Senators Talk Shit To Tourre
Throwing Goldman Sachs’ execs own words back at them, Senators repeatedly perked up everyone’s ears Tuesday as they pointedly tossed around the obscenity the execs had so liberally used to describe one of their failing investment deals, known as Timberland. Funnily enough, it was Sen. Carl Levin (D-MI), chair of the Senate investigative panel looking into Goldman, who was getting the most mileage out of the epithet as he blasted the execs being questioned for their “unbridled greed” and repeatedly accused them of peddling a “shitty deal” to investors. In the process, he described not only how his committee’s 18 month investigation into Goldman had revealed documents that prove the firm not only bet against the U.S. housing market, but also how it earned huge profits doing so while taking advantage of many of its own clients.
According to Politico,
The heart of the matter was whether Goldman Sachs intentionally sold complicated financial products that it knew would fail – or had designed purposely to do so. Goldman strenuously denies this allegation.
But Levin conjectures that Goldman continues to deny the allegation because “the firm cannot successfully continue to portray itself as working on behalf of its clients if it was selling mortgage related products to those clients while it was betting its own money against those same products or the mortgage market as a whole.”
Goldman Sachs’s Chief Risk Officer Craig Broderick begs to differ, however. He basically says that it’s not Goldman’s job to tell its clients whether investments are smart or not– it simply makes the investments possible. Or, as Politico quoted: “Our clients expect us to facilitate transactions for them in all market conditions,” Broderick said in prepared testimony. “As such, the better we understand and can manage risk, the more willing and able we are to transact with clients, regardless of our views on the markets.” Sort of valid argument, I guess. Doesn’t directly address the Paulson issue/the fact that they knew Paulson created the CDOs he was betting against and then they profited off the deal, but whatever.
Next up: Tourre. One of the most anticipated witnesses of the afternoon. For his part, Tourre said “I deny — categorically – the SEC’s allegation. And I will defend myself in court against this false claim.” In the hearing, Tourre sought to portray himself as a simple middleman, but it’s pretty clear from every other article/interview ever done on Tourre that he was the brains behind the operation. And yet, he claimed, “I was an intermediary between highly sophisticated professional investors — all of which were institutions. None of my clients were individual, retail investors.” That may, perhaps be true. His investors may well have been highly sophisticated (as institutional investors with billions of dollars tend to be), but that doesn’t mean that Tourre himself was some idiot just pushing papers.
Regarding the specific allegation that Tourre set up the Abacus deal without revealing that a hedge fund, Paulson & Co., which was involved in selecting the assets at the heart of the transaction, was betting against the mortgages tied to the CDOs selected. Tourre said:
I never told ACA, the portfolio selection agent, that Paulson & Company would be an equity investor in the AC-1 transaction or would take any long position in the deal. Quite frankly, I am surprised that ACA could have believed that the Paulson fund was an equity or long investor in the deal. The AC-1 transaction was not designed to fail.
When asked about how the release Tourre’s personal emails to his girlfriend and others had been released by his own employer made him feel, Politico reports that Tourre responded, “I regret these emails. They reflect very bad on the firm and myself,” Tourre said. “I wish I hadn’t sent those.” Subcommittee’s ranking Republican Sen. Tom Coburn (R-OK), rightly thinking such a response sounded a little canned, inquired as to how many lawyers had helped the Fabulous Fab (as he referred to himself in emails) and he replied that he didn’t know. When asked if Goldman was paying for his counsel, he answered in the affirmative. Shocking.
When questioned about Goldman’s responsibility for the financial crisis of 2008, Goldman mortgage executive Michael Swensen asserted,
We did not cause the financial crisis. I do not think that we did anything wrong. There’s things that I think we could have done better in hindsight.
The entire day boiled down to this: the highly coached Goldman execs gave up nothing. They were at turns incredulous, puzzled, and even “hurt” by the accusations leveled against them, but at no time did they admit to anything. They very slowly and very deliberately responded to every question asked to run out the clock on each questioner’s time limit, as Sen. Susan Collins (R-ME) astutely observed at one point, and categorically denied any wrongdoing. They were professionally coached within an inch of their lives (well, as well as they could be on such short notice). And as the Senators’ collective frustration mounted, the obscenities flew. It’s a shitty situation… because the Senators recognize what’s at stake here. At stake is more than just the reputation of one of the largest, most important financial investment institutions in the world. And, of course, there are potential jail sentences to be served and millions if not billions to be repaid in reparations if Goldman is found guilty of civil fraud. But more importantly, at stake is fate of the crucial financial reform legislation which is currently stuck on the Senate floor thanks to a filibuster by Republicans seeking to alter the proposal.
According to Politico,
Democrats are trying to portray Republicans as the party doing Wall Street’s bidding, and hope that revelations about Goldman Sachs’ conduct will put political pressure on GOP senators to reverse course on the sweeping regulatory bill.
We’ll see in the coming days and weeks if there is any change in the Republicans’ tune.
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