Reply #26: Blankfein faces grilling on Capitol Hill

[Demeter]

http://www.ft.com/cms/s/0/f51dd456-4992-11df-9060-00144...

The pressure on Goldman Sachs will intensify this month when Lloyd Blankfein, the US bank’s chief executive, faces tough questioning from a high-powered Senate panel as part of a probe of Wall Street groups.

People close to the situation said Mr Blankfein would testify before the Senate’s permanent subcommittee on investigations on April 27 after months of questioning of Goldman executives by the panel’s staff, including sworn depositions about the bank’s activities leading up to the global financial meltdown.

Mr Blankfein has appeared on Capitol Hill before, including a controversial appearance before a Congress-appointed inquiry in January.

But the subcommittee conducts some of the most thorough investigations in Washington and has the time and resources to use its subpoena power aggressively.

Carl Levin, the Democratic senator who heads the panel, has been tight-lipped about the probe, but told reporters it had discovered levels of greed that were “frankly disgusting”.

Mr Levin’s staff declined to comment on the hearing or disclose the witness list, which may include other Wall Street executives. But Mr Levin and staff have signalled interest in investment banks’ trading practices and Wall Street’s use of complex instruments.

He has said the probe would examine “how securitisations and financial engineering ran wild . . . and how credit default swaps turned investing in America into gambling on the demise of one American company or another”.

Mr Levin said he would decide at the conclusion of four planned hearings whether to refer the panel’s findings to the Department of Justice.

The panel began its investigation into the causes of the financial crisis in November 2008. In its first two hearings this week investigators revealed stunning new details about the collapse of Washington Mutual, the thrift that was seized by the government in 2008 and sold to JPMorgan Chase, and the failure of regulators to rein in reckless lending practices at the bank.

Next week, the panel will release details about its probe into failures at credit rating agencies.