"Unfortunately, the housing market went south very quickly," Lloyd Blankfein told skeptical senators on an investigatory panel. "So people lost money in it."
He was the final witness in a daylong hearing on Goldman Sachs' behavior, which resulted in a government civil fraud charge earlier this month. Five present and two former Goldman officials held their ground in hours of contentious testimony, unflinchingly defending their conduct and denying that the Wall Street investment bank helped cause the near-meltdown of the nation's financial system.
While the famous firm fought for its reputation, senators said the company's actions leading up to the financial crisis clearly demonstrated a need for stronger regulation, and Democrats hoped the hearing would build support for legislation now before the Senate. Republicans have so far succeeded in blocking debate, and did again on Tuesday. But more test votes are expected, and GOP lawmakers floated a partial alternative they said could lead to election-year compromise on an issue that commands strong public support.
If the two parties were far apart on terms of a regulation bill, they united in criticizing Goldman in the highly charged committee room in a direct confrontation between Wall Street and Congress.
Sen. Carl Levin, D-Mich., the panel's chairman cited a "fundamental conflict" in Goldman's selling securities and then betting against the same securities - and not telling the buyers.
"They're buying something from you, and you are betting against it. And you want people to trust you. I wouldn't trust you," Levin told Blankfein.
Blankfein denied such a conflict. "We do hundreds of thousands, if not millions of transactions a day, as a market maker," Blankfein said, noting that behind every transaction there was a buyer and a seller, creating both winners and losers.
