News / USA

Execs at Giant Wall Street Firm Grilled Over Fraud Allegations

Current and former account managers at a major U.S. financial firm accused of fraud defended their actions on Tuesday at a contentious Senate hearing in Washington. The testimony came amid ongoing efforts to overhaul America's financial regulations after the 2008 crisis that struck an already-weakened U.S. economy and led to massive government bailouts of the private sector.

The U.S. economy might be rebounding from a severe recession, but aftershocks from the financial crisis continue to reverberate on Capitol Hill as Congress looks for ways to prevent a repeat of the 2008 economic crisis.

The Senate's Permanent Subcommittee on Investigations has a keen interest in Goldman Sachs -- one of America's best-known and largest investment houses.

At the start of Tuesday's hearing, subcommittee chairman, Democrat Carl Levin of Michigan, accused Goldman Sachs of packaging and selling financial products tied to risky home mortgages -- without disclosing that it was investing in financial instruments that would increase in value, if the mortage-backed securities failed.

"Its [i.e., Goldman Sachs'] misuse of exotic and complex financial structures helped spread toxic mortgages throughout the financial system.  And when the system finally collapsed under the weight of those toxic mortgages, Goldman profited from the collapse.  The firm's own documents show that while it was marketing risky mortgage-related securities, it was placing large bets against the U.S. mortgage market.  Goldman did well when its clients lost money," he said.

All senators at the hearing expressed revulsion over Goldman Sachs' activities in the years leading up to the financial crisis.

Republican John McCain of Arizona called the firm's behavior "unethical."  He said the financial giant would be judged by the American people as well as the nation's courts.

Lawmakers repeatedly asked current and former Goldman Sachs account managers how, in good conscience, they could sell products without telling company clients about the firm betting on their failure. "How do you view your responsibility?  That is my question.  If you have an adverse interest to your client, do you have a duty to disclose that to your client?," asked Senator Levin.

Republican Senator Susan Collins of Maine asked "Do you have a duty to act in the best interests of your clients?"

And Democratic Senator Mark Pryor of Arkansas. "Do you have a responsibility to disclose when you have an adverse interest to the client?"

At first, the former head of Goldman Sachs' mortgage department, Daniel Sparks, did not to answer directly.  More than two hours into the hearing, he gave this response. "No.  That is not something that is a responsibility of a market-maker, to tell your counter-parties, at all times, how you are positioned," he said.

Sparks and others on the panel seemed to dispute suggestions that their jobs entailed advising their clients on investments, viewing themselves instead as creators and vendors of financial products.

Another Goldman Sachs executive, Fabrice Tourre, put it this way. "I believe we have a duty to serve our clients, to show prices to our clients and to offer them liquidity.  I do not believe we were acting as investment advisors for our clients," he said.

The federal government has accused Goldman Sachs of fraud and has named Tourre in the lawsuit. Tourre denied any wrongdoing. "I will defend myself in court against this false claim," he said.

America's once-booming housing market spawned numerous complex financial products tied to the mortgage industry.  And these investments were sold to a wide range of institutions.  When the housing market faltered, it triggered a wave of mortgage defaults.  Investments tied to those mortgages plummeted in value, and many holders of those investments -- as well as firms that insured them -- faced financial ruin.  Many of America's largest and best-known financial institutions collapsed, triggering a credit squeeze that accelerated the nation's plunge into a deep economic recession.

You May Like

Philippines, Muslim Rebels Try to Salvage Peace Pact

Peace process faces major setback after botched military operation to find terrorists results in bloody gunbattle between government forces, Moro Islamic Liberation Front fighters More

Republicans Expect Long, Expensive Presidential Battle

Political strategist says eventual winner will be one who can put together strongest coalition of various conservative groups that make up Republican Party More

Video New Wheelchair Is Easier to Use, Increases Mobility

Engineers have come up with a lever-operated design that makes use of easily accessible bicycle technology More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Liberia's Almost Last Ebola Patient Grateful but Still Grievingi
X
Benno Muchler
March 26, 2015 3:41 PM
Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video US, South Korea Conduct Joint Military Exercises

The Eighth U.S. Army Division and the Eighth Republic of Korea Mechanized Infantry Division put on a well orchestrated show of force for the media this week during their joint military training exercises in South Korea. VOA’s Seoul correspondent Brian Padden was there and reports the soldiers were well disciplined both in conducting a complex live fire exercise and in staying on message with the press.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.
Video

Video Young Filmmakers Shine Spotlight on Giving Back

A group of student filmmakers from across the United States joined President Barack Obama at the White House this month for the second annual White House Student Film Festival. Fifteen short films were officially selected from more than 1,500 entries by students aged 6 through 18. The filmmakers and their families then joined the president and a group of celebrities for a screening of their films. VOA’s Julie Taboh reports.
Video

Video VOA Exclusive: Interview with Afghan President Ashraf Ghani

Afghan President Ashraf Ghani, during his first visit as president to Washington, gave a one-on-one interview with VOA Afghan Service reporter Said Suleiman Ashna, about his request for a change in U.S. troop levels, the threat from the Islamic State, and repairing relations with the United States and Pakistan. The interview was held at Blair House, late Sunday, in Pashto.
Video

Video California Science Center Tells Story of Dead Sea Scrolls

The ancient manuscripts were uncovered in the mid-20th century, and they are still yielding clues about life and religious beliefs in ancient Israel. As VOA's Mike O'Sullivan reports, an exhibit in Los Angeles shows how modern science is bringing the history of these ancient documents to life.
Video

Video Angelina Jolie Takes Another Bold Step

Hollywood actress and filmmaker Angelina Jolie has revealed she had her ovaries and fallopian tubes removed to lower her odds of getting cancer. Doctors say the huge publicity over her decision will help raise awareness about the importance of cancer screening. VOA’s George Putic has more

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More