Source: The Canadian Press

The U.S. Senate dumped the soiled laundry of the market meltdown at the feet of one of America’s most storied financial houses Tuesday, accusing Goldman Sachs executives such as “Fabulous Fab” of betting against the collapsing financial market at the expense of their unknowing clients.

Top company officials defended their conduct during the biggest economic crisis since the Great Depression, denying allegations from the U.S. government that they formulated a strategy to amass huge profits while selling out their unwitting investors. The firm was one of the few on Wall Street to emerge stronger and more profitable in the aftermath of the tailspin.

Democrat and Republican senators alike challenged them repeatedly in exchanges that featured the type of colourful language not routinely heard in the Senate.

A stern Sen. Carl Levin, a Democrat from Michigan who heads the Senate subcommittee holding the hearing, peered over his reading glasses to ask one executive about a US$1 billion product known as Timberwolf that the company sold to investors while betting against it.

Levin repeatedly made reference to an internal Goldman Sachs email that stated: “Boy, that Timberwolf was one shitty deal.”

“You knew it was a shitty deal and that’s what your emails show,” Levin said to Daniel Sparks, the former head of the investment giant’s mortgages department. “How much of this shitty deal did you continue to sell to your clients?”

He added: “How about the fact that you sold hundreds of millions of that deal after your people knew it was a shitty deal? Does that bother you at all? …. Should Goldman Sachs be trying to sell the shitty deal, can you answer that one yes or no?”

Sparks replied that he didn’t believe the e-mail was referring to the product, but to his performance as a manager at the most successful securities firm in Wall Street history.

“I don’t recall selling hundreds of millions of that deal after that,” he added.

Timberwolf, known as a collateralized debt obligation, lost 80 per cent of its value during the meltdown and was liquidated in 2008.

A Republican senator from Nevada said people in the gambling mecca of Las Vegas would be offended to be compared to Wall Street financial gurus, referred to as “bookies” by yet another lawmaker.

“In Las Vegas most people know that the odds are stacked against them,” John Ensign said. “On Wall Street, they manipulate the odds while you’re playing the game.”

Goldman Sachs is facing charges of fraud by the U.S. Securities and Exchange Commission. Fabrice Tourre is the only company employee named by the SEC, and denied the allegations to the Senate panel earlier Tuesday.

“I will defend myself in court against this false claim,” said Tourre, 31, who referred to himself in the third person as “Fabulous Fab” for his financial wizardry in recently released emails.

The high-profile, standing-room-only hearing, attended by hordes of media, comes at a fortuitous time for Democrats as they attempt to push legislation through Congress that would toughen financial sector regulations.

They’re facing resistance from Republicans despite public opinion polls that suggest most Americans favour increased regulation in the financial sector similar to the state of affairs in Canada, where Canadian banks and financial institutions weathered the economic crisis without taxpayer bailouts.

Canadian authorities have the power to monitor and impose capital requirements and leverage limits for nearly all financial institutions, including insurance companies. Contrary to Republican fears that such regulation amounts to socialism and hinders the success of financial institutions, some of the largest and most profitable banking institutions in the world are Canadian.

At the G20 meeting of finance ministers and central bank governors last week in Washington, Finance Minister Jim Flaherty frequently pointed out that the financial sector overhauls being pondered by the U.S. and other industrialized countries have long been in place north of the border.

Rather than stifling free enterprise, Levin said, attempts by Democrats to overhaul the financial sector would “put a cop back on the Wall Street beat.”

He told the hearing that the actions by Goldman Sachs wreaked havoc on the U.S. economy, adding “its conduct brings into question the whole system of Wall Street.”

Goldman Sachs CEO Lloyd Blankfein was scheduled to testify later Tuesday. But in his prepared testimony, Blankfein said his company didn’t bet against its clients and could not survive without the trust of its customers.