The masters of the universe were forced down to earth on Tuesday.
Goldman Sachs Chief Executive Lloyd Blankfein, the head of the most powerful investment bank in the world, faced a blistering cross-examination from US lawmakers about the company’s ethics and behavior toward its clients.
Blankfein conceded in the final hours of a nearly 11-hour hearing that the criticism of his firm would lead to soul searching. He said “everything that’s been the subject of criticism will be tightened up,” an indication that the pressure on Wall Street may be starting to change behaviour.
Blankfein, who said last year that he was “doing God’s work,” was asked again whether it was morally correct for the bank to sell clients securities while at the same time the firm was betting against them.
“You’re going short against the very security (you’re selling) ... many of which are described as crap by your own sales force internally,” said Levin, chairman of the Senate Permanent Subcommittee on Investigations.
Blankfein was the last in a parade of Goldman Sachs Group current and former executives who tried to fend off accusations they helped inflate the housing bubble and then made billions off the market’s collapse.
The hearing starkly illustrated the conflict between Washington and Wall Street over blame for the financial crisis, and resistance to some of the key financial reforms the Obama administration is trying to push through Congress. The hearing came less than two weeks after the US Securities and Exchange Commission filed a civil fraud suit against Goldman, charging that it hid vital information from investors about a mortgage-related security. Reuters