Tuesday, June 08, 2010

Goldman accused of hindering crisis probe

Goldman accused of hindering crisis probe
By Tom Braithwaite in Washington and Francesco Guerrera and Justin Baer in New York
Copyright The Financial Times Limited 2010
Published: June 7 2010 18:03 | Last updated: June 7 2010 22:25

The US Financial Crisis Inquiry Commission accused Goldman Sachs on Monday of an “abysmal” response to requests for information and said it had issued a subpoena to compel the bank to provide documents and executives for interviews.

Phil Angelides, commission chairman, said Goldman had failed to answer some questions while providing an indigestible 5 terabytes of data – equivalent, he said, to 2.5bn pages – in response to others. “We did not ask them to pull up a dump truck to our offices and dump a load of rubbish,” he said.

Goldman, which emerged from the financial crisis in better shape than most rivals, is now facing a tide of criticism from around the world – including China’s state-controlled media – as well as civil fraud charges filed by the Securities and Exchange Commission.

The FCIC was set up by Congress to study the causes of the financial crisis and has been equipped with broad legal powers. Mr Angelides, a former California state treasurer, is the Democratic chairman; Bill Thomas, former head of the House ways and means committee, is the Republican vice-chairman.

Mr Angelides and Mr Thomas said Goldman had been asked to provide information similar to that sought from other big banks but was an “outlier” in its “abysmal” response, which they described as an attempt to “stonewall” and “obfuscate” over months of “mischief making”.

Mr Thomas said: “The type and the volume of requests we’ve made to Goldman was not inordinate compared to at least half a dozen banks. The other banks complied.”

Goldman said: “We have been and continue to be committed to providing the FCIC with the information they have requested.”

The bank has denied SEC charges that it misled investors in a mortgage-related security the bank created in the early stages of the financial crisis.

Mr Thomas said it was unlikely he would call Lloyd Blankfein, the bank’s chief executive, to testify in public again after he appeared – without a subpoena – in January. “I’m not interested in providing him with the public forum to sound reasonable when in fact his behaviour has not been,” he said. “I think we can . . . do more damage to them in the public media over their unwillingness to be co-operative.”

Mr Blankfein; David Viniar, chief financial officer; Craig Broderick, chief risk officer; and Gary Cohn, chief operating officer; will be compelled to attend private interviews with FCIC staff.

The subpoena includes demands for interviews with executives “most knowledgeable” about “Abacus” – the collateralised debt obligation at the heart of the SEC complaint – and transactions with insurer AIG.

Goldman shares fell 2.4 per cent on Monday and are down nearly 18 per cent this year.

Additional reporting by Justin Baer in New York

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