Senate panel slams Goldman in scathing crisis report

Reuters, by Kevin Drawbaugh, WASHINGTON | Wed Apr 13, 2011

Lloyd Blankfein, Chairman and CEO of Goldman Sachs, addresses the International
Women of Courage Awards Ceremony at the State Department in Washington
March 8, 2011. Tuesday marks the 100th anniversary of International Women's Day.
(Credit: Reuters/Kevin Lamarque)

(Reuters) - In the most damning official U.S. report yet produced on Wall Street's role in the financial crisis, a Senate panel accused powerhouse Goldman Sachs of misleading clients and manipulating markets, while also condemning greed, weak regulation and conflicts of interest throughout the financial system.

Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations, one of Capitol Hill's most feared panels, has a history with Goldman Sachs.

He clashed publicly with its Chief Executive Lloyd Blankfein a year ago at a hearing on the crisis.

The Democratic lawmaker again tore into Goldman at a press briefing on his panel's 639-page report, which is based on a review of tens of millions of documents over two years.

Levin accused Goldman of profiting at clients' expense as the mortgage market crashed in 2007. "In my judgment, Goldman clearly misled their clients and they misled Congress," he said, reading glasses perched as ever on the tip of his nose.

A Goldman Sachs spokesman said, "While we disagree with many of the conclusions of the report, we take seriously the issues explored by the subcommittee."

The panel's report is harder hitting than one issued in January by the government-appointed Financial Crisis Inquiry Commission, which "didn't report anything of significance," Republican Senator Tom Coburn said at the briefing.

More than two years since the crisis peaked, denunciations of Wall Street misconduct are less often heard on Capitol Hill, with lawmakers focused on fiscal issues. But Coburn joined Levin at Wednesday's bipartisan briefing, firing his own sharp attacks on the financial industry.

"Blame for this mess lies everywhere -- from federal regulators who cast a blind eye, Wall Street bankers who let greed run wild, and members of Congress who failed to provide oversight," said Coburn, the subcommittee's top Republican.

"It shows without a doubt the lack of ethics in some of our financial institutions who embraced known conflicts of interest to accomplish wealth for themselves, not caring about the outcome for their customers," he said.

The Levin-Coburn report criticized not only Goldman, but Deutsche Bank, the former Washington Mutual Bank, the U.S. Office of Thrift Supervision and credit rating agencies Moody's and Standard & Poor's.

"We will be referring this matter to the Justice Department and to the SEC," Levin said at the briefing, though he did not elaborate. A spokesman later said, "The subcommittee does not intend to reveal the specifics of any referral."

The report offered 19 recommendations for reform going beyond changes already enacted after the crisis in 2010's Dodd-Frank Wall Street and banking regulation overhaul.

Case studies from the go-go years of the real estate bubble formed the bulk of the report, which said a runaway mortgage securitization machine churned out abusive loans, toxic securities, and big fees for lenders and Wall Street.

It cited internal emails by Wall Street executives that described mortgage-backed securities underlying many collateralized debt obligations, or CDOs, as "crap" and "pigs."

It said Washington Mutual -- which became the largest failed bank in U.S. history in 2008 -- embraced a high-risk home loan strategy in 2005 while its own top executives were warning of a bubble that "will come back to haunt us."

The U.S. Office of Thrift Supervision -- which will be shut down and merged into another agency under 2010's Dodd-Frank regulatory overhaul -- logged 500 serious deficiencies at Washington Mutual from 2003-2008, but no crackdown followed, the report said.

Mass downgrades of mortgage-related investments in July 2007 by Moody's and Standard & Poor's constituted "the most immediate cause of the financial crisis," it said.

Investment banks, it said, charged $1 million to $8 million in fees to construct, underwrite and sell a mortgage-backed security in the bubble, and $5 million to $10 million per CDO.

As for Goldman, the subcommittee said, the firm "used net short positions to benefit from the downturn in the mortgage market." It said Goldman designed, marketed, and sold CDOs in ways that created conflicts of interest with clients, while also at times providing the bank with profits "from the same products that caused substantial losses for its clients."

(Additional reporting by Lauren LaCapra and Kim Dixon; Editing Steve Orlofsky)

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"A Summary" – Apr 2, 2011 (Kryon channeled by Lee Carroll) (Subjects: 2012, Currencies, Water Cycle (Mini Ice Ace, Oceans, Fish, Earthquakes ..), EU, Middle East, Internet, Israel, Palestine, Japan, Nuclear Power, Hydro Power, Geothermal Power, Financial Institutes, China, North Korea, Global Unity,..... etc.) - New

"The New Paradigm of Reality" Part I/II – Feb 12, 2011 (Kryon channeled by Lee Carroll) (Subjects: Who/What is Kryon ?, Egypt Uprising, Iran/Persia Uprising, Peace in Middle East without Israel active involved, Muhammad, "Conceptual" Youth Revolution, "Conceptual" (without a manager hierarchy) managed Businesses, Internet, Social Media, News Media, Google, Bankers, Global Unity,..... etc.)

"The Timing of the Great Shift" – Mar 21, 2009 (Kryon channeled by Lee Carroll)(Text version)

“ ….. Let me give it another name: It's an actual shift to a higher vibration of Human nature. "Kryon, that's impossible. Human nature is Human nature. We can't change it." Well, you've already begun it. You're starting to clean up your financial institutions worldwide. Did you notice? Dear ones, if anyone had ever told you 30 years ago that you were going to clean up your financial institutions, they would have laughed. For don't you know the way society works? Those who have the money win. Banks hold all the cards, and they are run by the those in high places. They are untouchable, since the government is often the same people! Well, why don't you tell them that today. Look around you, because something just happened. It's not working that way, is it? What would make the difference? Consciousness. A new paradigm. You can see it in the news…..”

“ … Here is another one. A change in what Human nature will allow for government. "Careful, Kryon, don't talk about politics. You'll get in trouble." I won't get in trouble. I'm going to tell you to watch for leadership that cares about you. "You mean politics is going to change?" It already has. It's beginning. Watch for it. You're going to see a total phase-out of old energy dictatorships eventually. The potential is that you're going to see that before 2013.

They're going to fall over, you know, because the energy of the population will not sustain an old energy leader ..."

(Live Kryon Channelings was given 7 times within the United Nations building.)