Carl: “This is a shitty deal, this is crap, what you think about that.”
LB: “We are selling securities all the time that we don’t like” but people just want to buy things.
*5:41 – LB and Carl Levin go back and forth and back and forth on what being a market maker is and whether anyone care if Goldman is short something it was selling to someone else.
Carl: You’re selling, then shorting. LB: We’re buying and selling all the time.
Carl: “I wouldn’t trust you if you came to me trying to sell something.”
LB: The buyer doesn’t care. They don’t give a crap that we’re betting against this stuff.
*5:46 – John McCain pops in despite the fact he’s been gone the entire day. Asks Lloyd why he thinks Goldman needed the TARP money.
LB – “We were brought in” and had no choice but to take the gov’t money.
McCain – Brings up shorting the residential mortgage market. LB says they made $500 million in revenue in 2007, but “did not make big money.” McCain slips up and says “you took Pork, I mean TARP money.”
*5:52 – Has Goldman done anything, McCain asks, to help community banks and homeowners pay their bills? LB: “We delivered $1 billion of the firm’s money to philanthropy” with $500 million to help small businesses. “Are any of these things enough? Not for the suffering existing in the world, but we are trying to do our part.”
*5:56 – McCain is just taking up time. He asks Lloyd what a synthetic CDO is. (John, we just heard 8 hours of testimony on that)
*McCain can’t pronounce Abacus. Lloyd corrects him and says he doesn’t believe there needs to be any disclosure on who is on the short side of the Abacus. “Senator this is not the subject of the legal proceeding” McCain: “A lot of these things are complicated Mr. Blankfein and may of them are hurting very badly and they believe your handling of the mortgage and housing was a direct contributor to the meltdown.” So There.
*6:04 – LB: Responding to a question of whether they need clients, Lloyd says “clients used to ask you for advice and then go another institution and ask for financing” Now, you not only have to give them advice, you have to have the balance sheet to help them accomplish their objectives.
*6:08 – The senators still can’t seem to figure out when Goldman was short and when it was long on CDOs. Kaufman is going over the whole timeline again and Lloyd sticks to the playbook “We reduced our risk.”
Kaufman: “Don’t you think there’s an appearance of a conflict here?” LB: “I don’t know.”
Uh oh, protestors are getting uppity. They’re yelling and most likely being escorted out.
*6:15 – LB: “We didn’t behave like we knew” what was going to happen in the mortgage market and “our positions reflect that because had we known we would have been massively short the market.” Kaufman: At what point did you decide the market was crappy. LB: “I don;t know that the decision was made to leave that business.” (It was just to reduce risk, right Lloyd?)
Kaufman – People on Wall Street are really smart. They knew the housing market was a bad deal. LB: “We’re not that smart.”
*6:22 – Kaufman gets the last word. “What really bothers people the most is not the bailouts” but the incredible compensation to people who made “horrible decisions.” “The idea that Wall Street came out just fine, thank you.”
*6:25 – Coburn admits Congress was the one who screwed up in not regulating mortgages asks Lloyd if he’s concerned about anything he’s heard at the hearing today. LB says, while he’s in the business of worrying, he seems not concerned about the actions of the employees on the prior panels.
Lloyd hints at possibly shedding Goldman’s bank holding company status.
On the financial bill – “I’m generally supportive of it, although there’s some details I’m less comfortable with.” He mentions Obama’s speech and how he agrees with the president that regulation will help bring trust back to the markets.
*6:40 – LB: “The financial system will be safer if banks are required to have more capital.” “It’s important for Goldman Sachs that we take away the notion that we’re too big to fail. A lot of the negativity associated with us is because of the perception that we are too big to fail and we have to get rid of that.”
*6:48 – Coburn asks LB why Goldman released Fab’s personal email. “Why would you do that to your employee, Coburn said.”Somebody made a personal decision that he’s going to be the whipping boy.” LB said the firm wanted to get it all out and said “I don’t think we added to those emails.” (Basically danced around the question.)
Getting close to 7pm – Carl Levin is getting hungry.
*6:56 – “In hindsight, I wish we had done more. At the time, we believed we were doing appropriate due diligence and disclosure.”
Anyone who wants to read the “Shitty deal” emails can do so here.
*7:00 – When Lloyd says “Cats and dogs,” he means old stuff they need to get off their books.
*7:05 – McCaskill doesn’t seem to understand the futures market. “You guys are securitizing this stuff and tranching it.” LB goes back to his days as an oil trader to make the point that there are a lot of financial speculators out there.
*7:09 – LB on Abacus: “I know there is an inherent distaste for the short side some of things. But ACA, the selection agent, was the biggest buyer of the deal. They bought $900 million of it.” On rating agencies: “They were inaccurate. I think they never anticipated the market could fall as much as it did.”
*7:15 – More LB on Abacus: “I think our person who testified in the first panel, said the selection agent knew about [Paulson] going short.” Whether that information should have been disclosed, Lloyd says “I don’t know, there’s no duty on us to disclose the existence of a short.” The question is whether Paulson had undo influence on selecting the assets in the CDO, Lloyd said. He said more than half the securities suggested by Paulson were thrown out by the selection agent.
*7:30 – Jon Tester of Montana asks LB if Goldman is too big to fail. LB says, “I don’t believe so.” Tester thinks he and Lloyd are speaking different languages. “It seems to me, that it’s not like selling a broken horse,” Tester said, although he said it seemed to him that there was a failure to disclose relevant things to the parties in the transaction. “It sounds like a scam.”
*7:41 – “There are parts of the business where you are a money manager and there are other parts where you are giving the client something they want” and they understand that you might be taking the other side of the trade.
*7:55 – LB and Carl Levin get into a round and round about why Goldman took money from AIG instead of going to a private insurance contract. Asked if he was troubled by the fact that Goldman got taxpayer money. LB said he was.
*7:58 – Levin ends the hearing with some declarations: He raises the idea thank banker should not offer their clients investments they don’t themselves believe in. “You don’t see that and it troubles me that you don’t see that. Goldman Sachs has turned itself into its own client. You took stuff from your own inventory that you didn’t believe in and sold it, then you bet against it.”
*8:09 – 55B, man, 55B