Sen. Carl Levin grills Goldman Sachs Department Head Dan Sparks. "How Goldman got Comfortable?"

mr. sparks would you turn to exhibit 172 please all set yes miss now this is a series of emails that concerns a deal called Anderson that Goldman put together in March of 2007 Anderson was a 300 million dollar synthetic CDO and so what it did was reference certain other securities this reference subprime our mbss or residential mortgage-backed securities many of those securities were originated by new century which was a subprime lender notorious for poor quality loans Goldman participated as one of the short investors so you can see from that exhibit they bought lost protection or bought the short side for a hundred million dollars about 50% of the short side and 50% of the referenced assets so from the beginning of the deal right from the beginning Goldman is selling Anderson's securities to clients but it's betting against that CDO it got in the words their protection that pays off if the CDO assets the referenced assets start losing money so first if you'll take a look at the following email Goldman's clients reject the deal first of all because it has so much poor quality new century mortgages for example look at the third page of the exhibit a client asks how Goldman got quote comfortable with all the new century collateral and particularly the new sensory service deals now take a look at the internal response at the top of the page what it is is to get Goldman salespeople on the phone to allay the clients concerns about new century collateral but that doesn't work the next three emails tell the same story three more clients rabo Bank Smith Breeden and Turin reject the deal internally the drive to sell Anderson continues keep pushing the clients to buy look at the top of page six anything more for you guys or are they officially dead now now Goldman is asked a question by a customer potential customer what what did you guys do to get comfortable with all the new century collateral how can you get comfortable with that collateral that's a well-known company that has a very very bad record and what is your response response is hey we're going short we got half the short side we're betting against this deal here ask a specific question how do you guys get comfortable with this instead of saying hey we're betting against it we're taking half the short side what you do is you tell your sales people try to sell this deal you don't answer the question you don't respond to a direct question so you continue to push hard finally there's a sale that unloads twenty million dollars in Andersen notes page seven Goldman's of that same exhibit a goldman supervisor responds with a single word after you unloaded twenty million dollars in Andersen notes profit exclamation point Eureka he laid he didn't Eureka's my word he later congratulate s' the team excellent job pushing the closure these deals and a period of extreme difficulty now your clients didn't want to buy Anderson's CDOs with that exposure to the new century mortgages but you still pushed hard why did you not inform your clients that Goldman was short on nearly 50% of the Anderson CDO when selling Anderson's securities to them that's my question why did you tell him you were going short mr. chairman there are they're about eight emails in here I didn't see the email that suggested that we were short and I was trying to find that all right take a look it's today you have the document 92 93 take a look at document number 93 within this exhibit or I'm though a document number 93 and 94 together showing the shorts can you show me the two documents point out counterparties at it see where it shows the counterparty short side of the deal Coleman Sachs Goldman Sachs Goldman Sachs Goldman Sachs see all that yes mr. chairman okay now answer my question I believe this shows the counterparties which is called many times as Goldman Sachs that doesn't mean that Goldman Sachs wasn't doing that trade with another client so it's very difficult for me to say from looking at this whether we were short or not we might have been facilitating trades for clients assuming you were going short and staying short let me ask you the question should you have told that client when they asked how are you getting comfortable with this should you have told them you were going short if you were and mr. chairman just are so not particular to this because again I don't know in this case I'm asking in this case you're asked a question how do you guys get comfortable with these kind of mortgages but this kind of a mortgage broker well again I don't know if we were I know you don't know my question is assuming you in short okay and state and intended to stay short on that deal that's my question should you have been told the customer asking you the direct question how can you get comfortable with this that it was your intention to go short on 50% of the short side and stay that way if that was the fact that's my question again no no answer my question understand exactly what the question the question is very clear you said well you weren't sure whether or not you were buying that 50% for somebody else that's what your answer was my question is if you are buying as we know you were 50% that's my question if you were buying that short 50% of the short for yourself for your account my question is when asked how can you be selling this security how do you get comfortable with the source of the security was there an obligation at that time if you were going and intended to stay short with half the short side wasn't your responsibility to answer that direct question hey we're going short and we're staying short that's my question how do you view your responsibility that's my question under those circumstances so mr. chairman this transaction was a static synthetic which meant the assets were the assets and they couldn't change anybody participating in it should look at the assets themselves aren't those assets are those assets a pro's open to everyone who buys those synthetics the specific assets or are they protected are those not commercially protected the specific source if that's a legal question people no access to the information mr. chairman the the buyer is raising a question with you about these assets he's asking a direct question how can you get comfortable with these assets from this source how do you guys get comfortable your answer isn't hey under my hypothetical which is not hypothetical its factual but assuming you are going to buy half the short position and keep it my question is did you not have a responsibility to answer a direct question how can you get comfortable with these products from that source by saying we're going short half the short is what we're buying that's my question how do you view your ethical responsibility and again again you do want to accident question no the question that investors should and did focus on were whether the names that they had risk too was something to actually wanted at that price my question mr. sparks is a very direct question you were asked a question Goldman was asked a question how do you get comfortable with the source of these securities instead of saying disclosing right at that time but I think you ought to disclose anyway when you're on the other side of a deal we'll get into that but instead of disclosing that you had half of the other side of the deal half the short side you did not tell them that instead you told your salespeople keep pushing this deal you had three people turned it down because of the source and you kept pushing it but now answer my question when you're asked the question how do you get comfortable with these securities given the dubious source of this security given the amount the amount of this how much how dubious this was because of its source how you got clients they don't want to buy the security with so much exposure to the new sensory mortgages those new sensory mortgages have had problems I'm going to ask you for the last time if you don't want to answer it you can say you want you don't want to answer it but clearly you understand it did you not have a responsibility when you were asked point-blank how do you get comfortable in this kind of a situation when there's so much exposure to new century mortgages did you not then at least have an obligation to disclose hey we're not comfortable we're going selling this thing short we're going on the short side that's my question you understand the question mr. chairman I understand the question I haven't gone through all of the emails but the the what clients who did not want to participate in that deal did not the client I asked you a question how do you guys get comfortable it's a question so what was your answer mr. chairman we did you tell him we would have had the sales force get on with the deal team and walked through security that they had exposure to and answer any questions that they had about that security don't you also have a duty to disclose an adverse interest to your client do you have that duty do you about if you have an adverse interest to your client you have the duty to disclose that to your client the question about how the firm is positioned or our desk is positioned I'm you have an adverse interest to your client when you're selling something two of them do you have the at you of the Opera to tell that client of your adverse interest that's my question sure mr Turner I'm just trying to understand I think you understand that I don't think you want to answer I don't think you want to answer it how did you get comfortable with all the new century collateral mr. chair I know you I'm just going to go on because you're just going to keep that you're not going to answer the question it's obvious in particular

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Keywords: Goldman Sachs (Business Operation), Alex, Jones, Economics (Field Of Study), Finance, Mortgage, Backed, Security, NWO, Illuminati, Conspiracy, Beck, Ben Bernanke, Alan Greenspan

Id: 1kCuQsMAIUI

Length: 13min 5sec (785 seconds)

Published: Wed Jun 03 2015