WASHINGTON (AP) - Defending his company under blistering criticism, the CEO of Goldman Sachs testily told skeptical senators Tuesday that customers who bought securities from the Wall Street giant in the run-up to a national financial crisis came looking for risk "and that's what they got."
Lloyd Blankfein and other Goldman executives were lambasted by lawmakers for "unbridled greed" in an often-electric daylong showdown between Wall Street and Congress - with expletives frequently undeleted. Unrepentant, five present and two past Goldman officials unflinchingly stood by their conduct before a Senate investigatory panel and denied helping to cause the financial near-meltdown that turned into the worst recession since the Great Depression.
"Unfortunately, the housing market went south very quickly," Blankfein told skeptical senators. "So people lost money in it."
Democrats hoped the hearing would build momentum for legislation, now before the Senate, to increase regulation of the nation's financial system. That legislation would crack down on the kind of lightly regulated housing market investments that helped set off the crisis in 2007.
Senators from both parties verbally pounded the Goldman executives, accusing them of a financial version of rigged casino gambling that they said endangered the entire U.S. economy.
That drew a protest from Sen. John Ensign, a Nevada Republican. In Las Vegas, he said, "people know the odds are against them. They play anyway. On Wall Street, they manipulate the odds while you're playing the game."
Blankfein was the final witness in a daylong hearing on Goldman conduct that resulted in a Securities and Exchange Commission civil fraud charge earlier this month against the firm and one of its traders.
Sen. Carl Levin, D-Mich., the panel's chairman cited a "fundamental conflict" in Goldman's selling to clients home-loan securities that company e-mails showed its own employees had derided as "junk" and "crap" - and then betting against the same securities and not telling the buyers.
"They're buying something from you, and you are betting against it. And you want people to trust you. I wouldn't trust you," Levin said.
Blankfein denied such a conflict in a combative exchange. "We do hundreds of thousands, if not millions of transactions a day, as a market maker," he said, noting that behind every transaction there was a buyer and a seller, creating both winners and losers.
Goldman's chief said the company didn't bet against its clients - and can't survive without their trust. He repeated the company's assertion that it lost $1.2 billion in the residential mortgage meltdown in 2007 and 2008 that touched off the financial crisis and a severe recession. He also argued that Goldman wasn't making an aggressive negative bet - or short - on the mortgage market's slide.
He and other officials described their use of complex trading tools as a way to reduce risks for the company and its clients.
Earlier, Levin said that financial industry lobbyists "fill the halls of Congress, hoping to weaken or kill legislation" to increase regulation. He accused Wall Street firms of selling securities they wouldn't invest in themselves. That's "unbridled greed in the absence of the cop on the beat to control it," he said.
Whether Tuesday's hearing would help Democrats win Republican converts on the legislation remained an open question. "It's too soon to tell," Levin said in a brief interview outside the hearing. "We'll have to wait until the dust settles."
The Goldman witnesses strongly denied that the firm intentionally cashed in on the housing crash by crafting a strategy to bet against home loan securities while misleading its own investors.
"I will defend myself in court against this false claim," said Fabrice Tourre, a French-born 31-year-old Goldman trader who was the only individual named in the SEC suit. "I deny - categorically - the SEC's allegation."
The SEC says Tourre marketed securities without telling buyers they had been chosen with help from a Goldman hedge fund client that was betting the investments would fail. The commission alleged that Tourre told investors the hedge fund, Paulson & Co., actually bought into the investments. Tourre said he didn't recall telling investors that.
Tourre said: "I am saddened and humbled by what happened in the market in 2007 and 2008. ... But I believe my conduct was proper."
Was Goldman harmed by the hearing?
"Despite the interrogation, the Goldman team hasn't really provided any new information," market analyst Edward Yardeni said. "And the (senators) aren't creating a more damaging view than already existed."
"Right now, it looks like the PR battle has been fought to a draw," Yardeni added.
Sen. John McCain, R-Ariz., said that while there may not be proof that Goldman did anything illegal, "there's no doubt their behavior was unethical and the people will render a judgment as well as courts."
Sen. Tom Coburn, R-Okla., said the blame doesn't fall on Goldman alone. "There's numerous causes to the financial crisis, not just one." He said the blame must be shared by federal regulatory agencies who didn't use the powers they already have and by Congress. "In truth, we all took turns in inflating the housing bubble," he said.
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Associated Press writers Stevenson Jacobs in New York and Jim Kuhnhenn and Michael Sandler in Washington contributed to this report.