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 Obama Remembers Fallen Troops for Memorial Day

    President urges Americans this holiday weekend to 'take a moment and offer a silent word of prayer or public word of thanks' to country's veterans

    Upsurge of Migratory Traffic Across Sahara From West to North Africa

    A report by the International Organization for Migration finds more than 60,000 migrants have transited through the Agadez region of Niger between February and April

    UN Blocks Access to Journalist Advocacy Group

    United Nations has rejected bid from nonprofit journalist advocacy group that wanted 'consultative status,' ranking that would have given them greater access to UN meetings

    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.
    Chinese-Americans Heart Trump, Bucking National Trendi
    X
    May 27, 2016 5:57 AM
    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Chinese-Americans Heart Trump, Bucking National Trend

    A new study conducted by three Asian-American organizations shows there are three times as many Democrats as there are Republicans among Asian-American voters, and they favor Hillary Clinton over Donald Trump. But one group, called Chinese-Americans For Trump, is going against the tide and strongly supports the business tycoon. VOA’s Elizabeth Lee caught up with them at a Trump rally and reports from Anaheim, California.
    Video

    Video Reactions to Trump's Success Polarized Abroad

    What seemed impossible less than a year ago is now almost a certainty. New York real estate mogul Donald Trump has won the number of delegates needed to secure the Republican presidential nomination. The prospect has sparked as much controversy abroad as it has in the United States. Zlatica Hoke has more.
    Video

    Video Drawings by Children in Hiroshima Show Hope and Peace

    On Friday, President Barack Obama will visit Hiroshima, Japan, the first American president to do so while in office. In August 1945, the United States dropped an atomic bomb on the city to force Japan's surrender in World War II. Although their city lay in ruins, some Hiroshima schoolchildren drew pictures of hope and peace. The former students and their drawings are now part of a documentary called “Pictures from a Hiroshima Schoolyard.” VOA's Deborah Block has the story.
    Video

    Video Vietnamese Rapper Performs for Obama

    A prominent young Vietnamese artist told President Obama said she faced roadblocks as a woman rapper, and asked the president about government support for the arts. He asked her to rap, and he even offered to provide a base beat for her. Watch what happened.
    Video

    Video Roots Run Deep for Tunisia's Dwindling Jewish Community

    This week, hundreds of Jewish pilgrims are defying terrorist threats to celebrate an ancient religious festival on the Tunisian island of Djerba. The festivities cast a spotlight on North Africa's once-vibrant Jewish population that has all but died out in recent decades. Despite rising threats of militant Islam and the country's battered economy, one of the Arab world's last Jewish communities is staying put and nurturing a new generation. VOA’s Lisa Bryant reports.
    Video

    Video Meet Your New Co-Worker: The Robot

    Increasing numbers of robots are joining the workforce, as companies scale back and more processes become automated. The latest robots are flexible and collaborative, built to work alongside humans as opposed to replacing them. VOA’s Tina Trinh looks at the next generation of automated employees helping out their human colleagues.
    Video

    Video Wheelchair Technology in Tune With Times

    Technologies for the disabled, including wheelchair technology, are advancing just as quickly as everything else in the digital age. Two new advances in wheelchairs offer improved control and a more comfortable fit. VOA's George Putic reports.
    Video

    Video Baby Boxes Offer Safe Haven for Unwanted Children

    No one knows exactly how many babies are abandoned worldwide each year. The statistic is a difficult one to determine because it is illegal in most places. Therefore unwanted babies are often hidden and left to die. But as Erika Celeste reports from Woodburn, Indiana, a new program hopes to make surrendering infants safer for everyone.
    Video

    Video California Celebration Showcases Local Wines, Balloons

    Communities in the U.S. often hold festivals to show what makes them special. In California, for example, farmers near Fresno celebrate their figs and those around Gilmore showcase their garlic. Mike O'Sullivan reports that the wine-producing region of Temecula offers local vintages in an annual festival where rides on hot-air balloons add to the excitement.
    Video

    Video US Elementary School Offers Living Science Lessons

    Zero is not a good score on a test at school. But Discovery Elementary is proud of its “net zero” rating. Net zero describes a building in which the amount of energy provided by on-site renewable sources equals the amount of energy the building uses. As Faiza Elmasry tells us, the innovative features in the building turn the school into a teaching tool, where kids can't help but learn about science and sustainability. Faith Lapidus narrates.

    Special Report

    Adrift The Invisible African Diaspora