Goldman Sachs boss Blankfein to defend bank's record

LLOYD BLANKFEIN Chairman and chief executive of world's biggest investment bank, Goldman Sachs Earned more than $70m in 2007 - a record for a Wall Street boss. Took home less than $1m in 2009 Told magazine interviewer last year "I'm doing God's work".

Goldman Sachs boss Lloyd Blankfein will deny his investment bank bet against its own clients in the US property market at a Senate hearing later.

The under-fire banker will argue that Goldman was simply "managing [its] risk" in betting on market falls.

He will also say that the bank lost $1.2bn (£779m) as a result of the collapse in house prices in 2008.

On Monday, the US Subcommittee on Investigations accused Goldman of profiting at its clients' expense.

According to the subcommittee's chairman Senator Carl Levin, investigations show that Goldman bet on property prices falling, while selling clients investments that depended on a rising market in order to be profitable.

"Goldman Sachs made billions of dollars from betting against the housing market, and it placed those bets in some cases at the same time it was selling mortgage related securities to its clients," he said.

"They have a lot to answer for."

Charge disputed

The investment bank is also accused of fraud by the US regulator the Securities and Exchange Commission (SEC), relating to a specific deal selling mortgage-backed securities.

It is alleged that the bank sold the securities to clients without telling them that a hedge fund involved in putting the deal together had bet on the securities falling in value.

Mr Blankfein will be among the Goldman executives to appear before the committee later.

In a text of his prepared testimony, he said the bank "strongly disagreed" with the SEC's complaint, calling the episode "one of the worst days in my professional life".

"We have been a client-centred firm for 140 years and if our clients believe that we don't deserve their trust, we cannot survive."

He added that the accusation that the bank made money from bets on market falls ("short" positions) was simply not true.

"We didn't have a massive short against the housing market and we certainly did not bet against our clients," he said.

"Rather, we believe that we managed our risk as our shareholders and our regulators would expect."

Other Goldman executives due to appear at the hearing include the chief financial officer David Viniar, and the London-based trader Fabrice Tourre, named in the SEC charges.

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