Financial crisis panel subpoenas Goldman

Commission says investment bank failed to hand over documents

By Daniel Wagner

updated 3:26 p.m. ET, Mon., June 7, 2010

WASHINGTON - A panel probing the causes of the financial meltdown has issued a subpoena for documents from Goldman Sachs Group Inc., accusing the firm of stonewalling an investigation.

The Financial Crisis Inquiry Commission said Monday it had sent Goldman numerous requests for information, documents and interviews.

Goldman didn't respond to some questions, said panel chairman Phil Angelides. With others, it provided billions of pages of documents — far more than the commission staff can process.

"This has been a very deliberate effort over time to run out the clock," FCIC co-chair Bill Thomas said in a call with reporters. He said Goldman is "about mischief-making" and called the banks actions "unacceptable".

"We did not ask them to pull a dump truck to our offices and dump a bunch of rubbish," Thomas said.

At least other six investment banks answered similar requests from the commission without incident, Thomas said.

The subpoena includes requests for interviews with top Goldman executives including CEO Lloyd Blankfein and chief financial officer David Viniar. The panel chiefs said Goldman offered to schedule the interviews after receiving the subpoena Friday.

A spokesman for Goldman said the bank has cooperated.

"We have been and continue to be committed to providing the FCIC with the information they have requested," Goldman Sachs spokesman Michael Duvally said. He declined to comment further.

Goldman, a Wall Street powerhouse, profited from its bets against the housing market before the crisis. It continued to make huge profits after accepting bailout money and other government subsidies.

The bank's success and lavish executive pay have drawn attention at a time when the nation is dealing with near-double-digit unemployment.

The firm's mortgage speculation also has drawn civil fraud charges from the Securities and Exchange Commission and a criminal probe by the Justice Department.

Goldman is one of eight banks being investigated by New York Attorney General Andrew Cuomo on charges that they misled credit rating agencies.

The panel will release additional information about the Goldman subpoena later Monday. It will issue a final report on its findings by Dec. 15.

Bank stocks gave up early gains after the subpoena was announced. Goldman shares were down $2.45, to $139.80, in afternoon trading.

Congress created the bipartisan panel to investigate the credit crisis that led to the worst recession since the Great Depression. It already subpoenaed credit rating agency Moody's and billionaire investor Warren Buffett.

AP Business Writer Stevenson Jacobs in New York contributed to this report.

This goes with the above story QB

Goldman Sachs Stung by Backlash in China

Public criticism of Goldman Sachs has come to China, where the investment bank has been lambasted in articles in state-controlled media.
The Goldman Sachs booth on the floor of the New York Stock Exchange
Getty Images
The Goldman Sachs booth on the floor of the New York Stock Exchange

Parts of the media, apparently emboldened by congressional inquiries and public anger in the west, have openly slated Goldman [GS  138.68    -3.57  (-2.51%)   ] , arguably the most successful foreign investment bank in China.
“Many people believe Goldman Sachs, which goes around the Chinese market slurping gold and sucking silver, may have, using all kinds of deals, created even bigger losses for Chinese companies and investors than it did with its fraudulent actions in the U.S.,” read the opening lines of an article in the China Youth Daily, a state-owned daily newspaper, last week.
The article was widely distributed through commercial news portals and the websites of government mouthpiece Xinhua News and the People’s Daily, the Communist Party publication.
Referring to Goldman as a “black hand” that “played little tricks carefully designed to gamble with Chinese enterprises”, the article made few specific accusations of wrongdoing by the bank.
The report followed similar commentary and articles published in publications including the 21st Century Business Herald, one of the largest financial newspapers in the country, and New Century Weekly, a liberal magazine.
The reports were highly critical of Goldman for designing and selling oil hedging contracts to state-owned Chinese companies that then lost billions of dollars when oil prices plunged, contrary to Goldman analysts’ predictions, in 2008 and 2009.
Probably the most telling assertion in all of the articles is the complaint that Goldman has been too successful in China, that it has made too much money from underwriting initial public offerings, arranging deals and making its own private equity investments.
Goldman saw a 2007 investment in a small pharmaceuticals export company of less than $5 million rise to nearly $1 billion at the company’s IPO, a gain of 20,000 percent.
The bank has a lead role in the IPO of Agricultural Bank of China.
“Goldman has just been so successful in China, but this is one of the perils of success here,” said a senior banker at one rival in China.
“Many of its domestic competitors and some in the government are very unhappy that they have been doing so well lately.”
Chinese business reporters are rarely allowed to criticize powerful state enterprises, but foreign companies are often regarded as fair game.
“We’ve a very strong track record in China and one we’re proud of, but we need to help people better understand our business,” Edward Naylor, a spokesman for Goldman, said.