It was a marathon day in the Senate subcommittee for Goldman Sachs’ executives, and it was a pretty long one for anyone watching.
A lot of the proceedings were taken up with senators and Goldman executives speaking at cross-purposes, and with the Quixotic determination of Carl Levin, the subcommittee’s chairman, to show that Goldman was hugely short of subprime mortgage securities.
In among all this, however, were a few flashes of insight and spontaneity from the witnesses. I would pick out three:
First was the slip made by David Viniar, Goldman’s chief financial officer, when being pressed by Mr Levin on the email sent by Tom Montag, a former Goldman executive, describing the Timberwolf collateralised debt obligation as a “shitty deal”.
Amid laughter in the hearing room, Mr Viniar replied: “I think that’s a very unfortunate thing to have on an e-mail.” Here is the Washington Post on what followed:
Levin saw his opening and pounced.
“On an e-mail?” he thundered. “What about [an unfortunate thing] to believe?”
Viniar tried to backtrack but stepped squarely in a pothole.
“I think that’s a very unfortunate thing for anyone to say in any room,” he said.
Levin tightened his grip.
“What about believe?” he yelled.
“Yes, it’s a very unfortunate thing to believe,” Viniar said.
“That’s what you should have started with,” Levin said.
Fully cowed by now, Viniar surrendered. “You are correct,” he said. “It is.”
After a break in the proceedings, Mr Viniar raised the point again and apologised, clearly recognising that it had been a blunder.
The second moment, also relating to the “shitty deal” – a phrase that Mr Levin repeated relentlessly throughout the hearing – was when he asked Dan Sparks, the former head of Goldman’s mortgage department, to explain the phrase.
Mr Sparks responded that he had taken that as a criticism of himself rather than the deal itself:
“The message that I took from the email from Mr Montag was that my performance on that deal wasn’t good and I think the fact that we had lost money related to that.”
Given the centrality of the Timberwolf deal to the hearing, I would have liked to know more, but the senators brushed by it and did not ask him to elaborate.
Finally, I appreciated a characteristic moment of frankness from Lloyd Blankfein when, at the end of a day in which Goldman had constantly emphasised that it was not hugely short of the housing market in 2007 and 2008:
“We did not know what subsequently occurred in the housing market. We didn’t behave like we knew it … Had we known, we would have been massively short the market instead of just getting short about equal to what our longs were.”
Take that, Mr Levin.
