Goldman Sachs Emerges From Showdown Up $549 Million
April 28, 2010, 4:19 PM EDT
By Christine Harper and Michael J. Moore
April 28 (Bloomberg) -- Goldman Sachs Group Inc. executives endured more than 10 hours of congressional grilling in one of the most public, and most hostile, political lashings in the firm’s 141-year history. By day’s end, the investment bank’s market value had risen by $549 million.
Senator Carl Levin and members of his Permanent Subcommittee on Investigations said evidence they presented made the case for Congress to pass legislation tightening financial regulation. Goldman Sachs, the world’s most profitable securities firm, was alone among 79 stocks of the Standard & Poor’s 500 Financial Index in posting a gain yesterday. The shares added 2.6 percent in New York trading today.
“Both sides got what they wanted,” said Robert Hillman, a securities law professor at the University of California, Davis. “The Senate probably did what it felt it had to do, which was bring Goldman people up and embarrass them. For Goldman, the goal was to demonstrate that they had not engaged in fraud or illegal conduct. They probably succeeded in that.”
The senators, capping a probe of Goldman Sachs that has lasted more than a year, peppered Chief Executive Officer Lloyd Blankfein and six current and former executives with questions about their duty to clients and the ethics of betting against the housing market as the bank sold mortgage-linked securities to customers. The hearing came 12 days after the Securities and Exchange Commission sued the New York-based firm for fraud, saying the bank misled investors in a mortgage-linked investment known as Abacus, claims the company denies.
‘Jarring’ Realities
“The cultural realities of what you all do is jarring to most Americans,” Sen. Claire McCaskill, a Democrat from Missouri and former prosecutor, told Blankfein during the hearing. “This notion of selling a product that you’re betting against is hard for people to understand.”
Blankfein, who repeatedly insisted the company had done nothing wrong, said after the hearing that he had “no illusions” about how hard Wall Street must work to win back the trust of the American people.
“Wall Street has a lot of work to do to regain the confidence of Main Street,” Blankfein told Bloomberg Television. “We have a lot to improve in our communication with Main Street and we’re committed to do it.”
In a voicemail to employees last night, Blankfein called the questioning “rigorous,” and said he tried to convey the “seriousness with which we adhere to the rules and regulations that govern our business.”
Shares of the company rose $3.97 to $157.01 in composite trading on the New York Stock Exchange at 4:15 p.m.
‘Continued External Focus’
“Let me remind you that we should anticipate continued external focus on Goldman Sachs for the foreseeable future,” Blankfein said in the message. “Please do not let this distract you from your daily responsibilities.”
Some senators used the hearing to advertise their position on a financial regulatory bill that’s been blocked by Republicans so far this week. Levin concluded the hearing by calling for tougher regulation than the bill contains, while Republicans including Tom Coburn said they felt the measure fails to address issues such as how to handle companies that are “too big to fail.”
As the day began, a line to enter the hearing stretched down the corridor on the first floor of the Dirksen Senate office building, the equivalent of half a city block. At the head of the queue were four protesters dressed in black-and- white convict stripes and holding “wanted” posters for Blankfein and Fabrice Tourre, the 31-year-old Frenchman who was the only Goldman Sachs employee named in the SEC suit. Television crews from Russia and Japan were among journalists who filled the packed room.
