THE INVESTMENT bank Goldman Sachs gained $549 million (€415 million) in value on the New York Stock Exchange on the very day that Senator Carl Levin accused the world’s most profitable securities firm of putting its interests ahead of its clients.
Mr Levin, who chairs the Senate permanent subcommittee on investigations, said he would leave the question of whether Goldman broke the law to the Securities and Exchange Commission (SEC) and the courts. “The question for us is one of ethics and policy,” Mr Levin said.
There were at least two possible explanations for why Goldman’s shares were the only ones to post a gain (of $2.85) on the Standard Poor’s 500 Financial Index, even as seven executives parried hostile questions from senators for nearly 11 hours ending on Tuesday evening.
“Clients ultimately believe association with the best is good for them in the long run,” Peter Kraus, a former co-head of investment management at Goldman wrote in a 2007 e-mail released by the Senate committee. Mr Kraus was explaining why clients stayed with the firm even though they lost money while Goldman gained.
The other explanation is that a unified Goldman defence emerged from the marathon hearing. Executives acknowledged misjudgments and unfortunate e-mails, but no misconduct. “I heard nothing today that makes me think anything went wrong,” Goldman’s chief executive Lloyd Blankfein said when he took the stand more than seven hours into the hearing. “I do not think that we did anything wrong,” said Michael Swenson, one of the firm’s managing directors.
The SEC has accused Goldman of fraud for allegedly selling securities that were designed to fail to unsuspecting clients.
Goldman executives argued that their clients were not dupes but sophisticated investors who knew what they were buying. The traders, who match buyers with sellers, but also hold securities and place bets on them – known as market makers – have no obligation to reveal their own position, they pointed out.
