Senator Carl Levin, chairman of the U.S. Senate panel that investigated the causes of the financial crisis, said that federal prosecutors should consider bringing perjury charges against Goldman Sachs CEO Lloyd Blankfein and others who testified before Congress last year, according to a Bloomberg article entitled “Goldman Sachs Misled Congress After Duping Clients, Levin Says.”
The Michigan Democrat said Goldman executives falsely denied under oath that Goldman took a financial position against the mortgage-backed securities market and against the interests of its own clients solely for its own profit. “In my judgment, Goldman clearly misled their clients and they misled the Congress,” Levin was quoted as saying.
Goldman counters that it did not have a massive net short position because its short positions were largely offset by long positions. However, in the case of one CDO, Hudson Mezzanine Funding 2006-1, Goldman Sachs allegedly told investors its interests were “aligned” with theirs while the firm held 100 percent of the short side, according to the Senate report.
The senior Republican on the panel, Sen. Tom Coburn, concluded that the facts show “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’.When that happens, no country can survive and neither can their financial institutions.”
Sen. Coburn said the 640-page Senate carries more heft than the three separate reports issued earlier this year by a politically divided Financial Crisis Inquiry Commission.
The Senate report comes less than a year after Goldman Sachs paid $550 million to settle SEC charges that it failed to disclose to investors that a hedge client was betting against, and influenced the selection of, CDOs the company was packaging and selling.
In releasing the report, Sen. Levin said he wants the Justice Department and the SEC to examine whether Goldman violated laws by misleading clients who bought collateralized debt obligations (CDOs) without knowing the firm would make money if they fell in value.
The report blames Wall Street banks that earned billions of dollars in profits creating and selling toxic CDOs for the market collapse and credit crisis. The harshest criticism was directed at investment banks, particularly Goldman Sachs and Deutsche Bank AG, which allegedly pushed CDOs that their own traders believed were likely to lose value.
The panel’s report was also critical of the role of credit-rating firms in the meltdown, lax oversight by Washington regulators, and the lack of lending standards that fueled the mortgage bubble and ultimately caused hundreds of bank failures.
These findings are the result of a two-year bipartisan investigation into the causes of the financial crisis. The leading Republican and Democrat on that panel, with the same facts at their disposal, reached the conclusion that Wall Street firms sold out their clients and the financial system for short-term profits, and that such a lack of ethics is dangerous to our financial systems and country.
The SEC and Commodity Futures Trading Commission are expected to review the Senate report in conjunction with writing hundreds of Dodd-Frank rules governing derivatives, mortgage securities and proprietary trading.
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