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

Video China Investigates Powerful Former Security Chief

Analysts say move by President Xi is an effort to win more party support, take step toward economic reforms, removing those who would stand in way of change More

South Africa Land Reforms Still Contentious 20 Years Later

Activists argue that the pace of land reform is slow and biased; legal experts question how some proposed reforms would be implemented More

In Vietnam, Religious Freedoms Violated, UN Finds

Beliefs reportedly prompt heavy surveillance, intimidation and travel restrictions 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.
Gazans in Shelled School Sought Shelteri
X
Scott Bobb
July 30, 2014 8:16 PM
Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Gazans in Shelled School Sought Shelter

Israel's air and ground assault against Hamas-led fighters in Gaza has forced many Palestinians to flee their homes, seeking safety. But safe places are hard to find, as VOA’s Scott Bobb reports from Jabaliya.
Video

Video Rapid Spread of Ebola in West Africa Prompts Global Alert

Across West Africa, health officials are struggling to keep up with what the World Health Organization describes as the worst ebola outbreak on record. The virus has killed hundreds of people this year. U.S. President Barack Obama and other world leaders are watching the developments closely as they weigh what actions, if any, are needed to help contain the disease.
Video

Video Michelle Obama: Young Africans Need to Embrace Women's Rights

U.S. first lady Michelle Obama urged some of Africa's best and brightest to advocate for women's rights in their home countries. As VOA's Pam Dockins explains, Obama spoke to some 500 participants of the Young African Leaders Initiative, a six-week U.S.-based training and development program.
Video

Video Immigrant Influx on Texas Border Heats Up Political Debate

Immigrants from Central America continue to cross the U.S.-Mexico border in south Texas, seeking asylum in the United States, as officials grapple with ways to deal with the problem and provide shelter for thousands of minors among the illegal border crossers. As VOA's Greg Flakus reports from Houston, the issue is complicated by internal U.S. politics and U.S. relations with the troubled nations that immigrants are fleeing.
Video

Video Study: Latino Students Most Segregated in California

Even though legal school segregation ended in the United States 60 years ago, one study finds segregation still occurs in the U.S. based on income and race. The University of California Los Angeles Civil Rights Project finds that students in California are more segregated by race than ever before, especially Latinos. Elizabeth Lee reports for VOA from Los Angeles.
Video

Video Vietnamese Staging Chinese Product Boycott After Oil Rig Spat

China recently pulled an oil rig from an area of the disputed South China Sea that Vietnam also claims. Despite the action, the incident has had a lingering effect on consumers in Vietnam. VOA's Reasey Poch reports from Hanoi on an effort to boycott Chinese products.
Video

Video A Summer Camp for All the World

VIDEO: During workshops and social gatherings, the Global Youth Village summer camp encourages young people to cooperate and embrace their differences, while learning to communicate with people from other countries. VOA's Deborah Block has more.
Video

Video From Cantankerous Warlock to Incorruptible Priest, 'Harry Potter' Actor Embraces Diverse Roles

He’s perhaps best known as Mad Eye Moody, the whimsical wizard in the Harry Potter franchise. But character actor Brendan Gleeson's resume includes dozens of films, and he embraces all the characters he inhabits with equal passion. In an interview with VOA’s Penelope Poulou, Gleeson discussed his new drama "Calvary" and his secret to success.

AppleAndroid