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Goldman Sachs: Key executive accepts some responsibility for meltdown

A top Goldman Sachs executive on Tuesday accepted a share of responsibility for his firm’s actions that may have led to the financial meltdown.

After more than six hours of testimony and sharp questioning by a bipartisan Senate investigations panel, David A. Viniar, executive vice president and chief financial officer for Goldman Sachs Group, acknowledged his company’s dealings may have played a role in the nation’s financial problems, but insisted his company was not alone.

Viniar “We share responsibility because we are a major player in those markets,” Viniar told Sen. John Ensign, (R-Nevada). Ensign praised Viniar for accepting some degree of responsibility, in contrast with other executives who were careful to avoid any blame.

“We did not cause the financial crisis,” Michael Swenson, managing director of Goldman’s structured products trading group, said earlier.  “I do not think we did anything wrong. There’s things we wished we could have done better in hindsight, but at the time I did not think we did anything wrong.”

What Goldman did and how it did it has been the subject of a day’s contentious battling between senators and top executives. In repeated questioning, senators were obviously uncomfortable with Goldman’s decision to go short on housing mortgages, helping to over-leverage the market that eventually burst.

But what especially troubled senators was the ethics of Goldman’s trading and investment activities.

Top executives defended the policy of selling investments to clients who expected the value to go up, even though the company was heavily on the short side, making money as the mortgages went down in value.

Panel chairman Sen. Carl Levin (D-Mich.) repeatedly quoted from company e-mails describing the investments in profane terms. It was those investments that the company sold to clients while often taking the declining end and making a profit.

Viniar defended the investment strategy, saying it was common throughout the industry. He, like other executives on Tuesday, defended Goldman’s actions in not telling clients about the investment bank’s own positions and that they were making money from the short side.

“It was a big short offsetting a big long,” Viniar said, repeatedly saying the net was not as large as critics have said.

Senate investigators argued that Goldman held more than $3 billion in short positions, indicating a large revenue stream to the bottom line. But the company insists the large short position was needed to offset the losses from mortgage long positions and that the net was relatively modest at less than $1 billion.

The panel recessed in the afternoon to allow senators to vote on the Democratic financial regulation package.

-- Jim Puzzanghera reporting from Washington; Michael Muskal reporting from Los Angeles

Photo: Goldman's David Viniar on Capitol Hill, with protesters in the background. Credit: Charles Dharapak / Associated Press

 
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