News / USA

US Senator Probing 2008 Financial Meltdown Blasts Goldman Sachs

Michael Bowman

A U.S. senator probing America's 2008 financial crisis says one of the nation's best-known investment houses marketed complex financial products to clients, while investing in instruments that would rise in value if those very same products failed.  Democratic lawmakers seek to advance a bill to overhaul the U.S. financial industry after a crisis that accelerated the nation's plunge into economic recession and led to massive government bailouts of the private sector.

Investment firm Goldman Sachs, already facing charges of fraud by U.S. financial regulators, now finds itself targeted by a Senate investigative panel probing the actions of financial firms leading up to the 2008 crisis.  On the eve of testimony by Goldman Sachs executives before Senate Permanent Subcommittee on Investigations, Chairman Carl Levin of Michigan gave a preview of evidence the government has collected against the firm, and laid out allegations the executives will be called on to answer.

Wielding copies of hundreds of emails between Goldman Sachs executives, Levin painted a picture of an investment house packaging and selling financial products tied to a risky segment of America's home mortgage industry.

The emails seem to show that beginning in 2007, Goldman Sachs lost confidence in the profitability of those financial products, but continued to market them while simultaneously placing bets that the products would plummet in value.

Levin said that when America's housing market declined and mortgage defaults soared, Goldman Sachs reaped huge returns while many of its clients - from individual investors to universities and other institutions - faced financial ruin.

"The evidence shows that Goldman Sachs helped build and operate a conveyor belt that fed toxic mortgages and mortgage securities into the financial system," said Carl Levin. "It then made large bets against the market that it helped create, reaping the profits from it.  In doing so, it sold to its clients products it clearly no longer believed in."

Levin said the subcommittee's goal is to uncover facts, not to assess the legality of Goldman Sachs' alleged actions.  He stressed that Goldman Sachs was not the only financial firm to engage in questionable dealings surrounding high-risk mortgages.

"The ultimate harm here is not just to the clients that were not well-served by their investment bank," he said. "The harm here is to all of us.  The toxins that Goldman Sachs and others helped inject into our financial system have done incalculable harm to people who have never heard of a 'synthetic CDO' [a financial security that manages the risk that an obligation will not be paid] and have no defenses against the harm that such exotic Wall Street creations can cause."  

Goldman Sachs has denied wrongdoing and pointed out that in some transactions involving high-risk mortgage products, it too lost money.

Related video report by Mil Arcega:

Levin spoke as fellow Democrats worked to bring a financial reform bill to the Senate floor for debate.  The legislation seeks to boost consumer protections in the financial industry, strengthen regulation and oversight of financial firms, limit the risk-taking ability of banks and other institutions and establish a procedure for the federal government to liquidate insolvent financial corporations.

The bill faces opposition from Republicans, who say it would give the federal government leeway to authorize future financial bailouts, and that it does not mandate preemptive action to break up institutions that are so large that, if they were to fail, could cripple the national economy.  

You May Like

Could Nemtsov Threaten Putin in Death as in Life?

Dynamic and debonair opposition leader had supported liberal economic reforms, criticized Russian president's aggression in Ukraine More

Oil Smuggling Highlights Challenges in Shutting Down IS Finances

Pentagon spokesman says Islamic State 'certainly continues to get revenue from the oil industry black market' but that airstrikes have made a dent More

India Focuses on Infrastructure, Investment to Propel Economy

Government expects economy to grow at 8 to 8.5 percent in next fiscal year 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.
US Supreme Court Hears Hijab Discrimination Casei
X
Katherine Gypson
February 25, 2015 11:30 PM
The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video US Supreme Court Hears Hijab Discrimination Case

The U.S. Supreme Court has heard opening arguments in a workplace religious discrimination case that examines whether a clothing store can refuse to hire a young woman for wearing the headscarf she says is a symbol of her Muslim faith. Katherine Gypson reports from the Supreme Court.
Video

Video Falling Gas Prices Hurt Nascent Illinois Hydraulic Fracturing Industry

Falling oil prices are helping consumers purchase cheaper petroleum at the pump. But that’s made hydraulic fracturing or “fracking” less economically viable for the companies in the United States invested in the process. VOA’s Kane Farabaugh reports on one Midwestern town that was hoping to change its fortunes by cashing in on the next big U.S. oil boom.
Video

Video Fighting in Sudan's South Kordofan Fuels Mass Displacement

Heavy fighting in Sudan's South Kordofan state is causing hundreds of thousands to flee into uncertain conditions. Local aid organizations estimate as many as 400,000 civilians have been internally displaced since the conflict began more than three years ago, while another 250,000 have fled across the border to refugee camps in South Sudan. VOA's Adam Bailes reports.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.
Video

Video A Filmmaker Discovers Her Biracial Identity in "Little White Lie

Lacey Schwartz grew up in an upper middle-class Jewish family, in a town in upstate New York where almost everyone she knew was white. She assumed that she was, as well. Her recent documentary, Little White Lie, tells the story of how she uncovered the secret of her true racial background. VOA’s Carolyn Weaver has more on the film.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video US-Cuba Normalization Talks Resume Friday

Negotiations aimed at normalizing diplomatic relations between the U.S. and Cuba resume Friday. On the table: lifting a half-century trade embargo and easing banking and travel restrictions. There's opposition in Congress, but some analysts say there may be sufficient political and economic incentives in both nations for a potential breakthrough this year. VOA's Mil Arcega reports.
Video

Video Pakistan's Deadline For SIM Registration Has Cellphone Users Scrambling

Pakistani cell phone users have until midnight Thursday to register their SIM cards, or their service will be cut off. While some privacy experts worry about government intrusion, many Pakistanis are just worried about keeping their phone lines open. VOA Deewa reporter Arshad Muhmand has more from Peshawar.
Video

Video Myanmar Warns Factory Workers to End Strikes

Outside Myanmar's main city Yangon, thousands of workers walked off their jobs earlier this month demanding a doubling of their wages, pay raises after a year and input from labor unions on industrial regulations. Since Friday, the standoff has grown more tense as police moved in to disrupt the sit-ins, resulting in clashes that injured people from both sides. VOA correspondent Steve Herman visited industrial zones which have become a focus of Myanmar's fledgling workers rights movement.
Video

Video Oscar Winners Do More Than Thank the Academy

The Academy Awards presentation is Hollywood’s night to reward the best movies from the previous year. It’s typically a lot of glitter, a lot of thank you’s, a lot of speeches. But many of this year’s speeches carried messages beyond the thank you's. VOA’s Carolyn Presutti takes a look.

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