This is a guest Post on Naked Capitalism by Tom Adams

Opening Remarks Overview:

The Senate committee presented a case that sought to refute the prior public statements of Goldman Sachs and establish that Goldman was, in fact, betting against clients and had rampant, and unacceptable, conflicts of interest. Senators Levin, Collins, McCain and McKaskill made statements that seem to anticipate many of the defenses that Goldman might make. An important theme of what the Senators are presenting is that, as Republican Senator McCain stated, Goldman will be judged in the court of public opinion, as well as in the legal courts. Their activity appears to be unethical and such activity needs to be reformed.

In the scheme of things, the committee seems well prepared and working with consistent themes: unethical behavior, non-productive gambling, that caused damage to the country even as Goldman reaped large profits.

Goldman employees read prepared statements that emphasized the prior talking points of the firm. They break no new ground. The statements will soon prove to be inadequate to prepare them for the line of questioning that the Senators take.

Senator Levin launches in detailed review of certain particularly toxic 2007 Goldman deals, including Anderson CDO, a Freemont MBS and the Timberwolf CDO. Levin is unable to get Sparks to concede whether he has a duty to let clients know that they were betting against the deals. Levin notes that a Goldman employee identifies that Timberwolf is a "####ty deal" but then continued to make it a number one priority to sell the deal to clients. Sparks stammers and equivocates, and Levin concludes that he is unwilling to answer the question of whether they had a responsibility to reveal Goldman had an adverse interest to potential investors.

It seems clear that the Goldman executives were completely unprepared for this line of hostile questioning and have no ready responses. How this could be and how they could not have anticipated how they would be grilled, is a true mystery.

Collins notes that it seems to be Goldman's strategy to burn through the time without answering anything. Whether this is true or not may be subject to debate. However, it seems clear that Goldman is doing a good job of making themselves look bad in this type of situation.

Josh Birnbaum is the first Goldman employee being quizzed that seems able to answer questions directly and explain…

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