Senate Panel Says Goldman Sachs 'Misled the Country,' Helped Create Housing Bubble

In an e-mail exchange between Tourre and Sparks in early 2007, the two employees wrote, "Gerstie and I are finishing up engagement letters with ACA and Paulson for the large RMBS COO ABACUS trade that will help Paulson short senior tranches." "Still reputational risk."

Another e-mail from Tourre to Birnbaum in May 2007 said, "100% Baa2 RMBS selected by ACA/Paulson."

Within nine months of the ABACUS 2007-AC1 deal, 99 percent of the mortgages in the portfolio had been downgraded, a near-perfect failure rate. Investors lost more than $1 billion on the deal while Paulson raked in $1 billion.

Goldman earned $15 million for its part in the transaction.

Hearing to Be Held Tuesday

"They misled the country, I believe, and they were not fair to their customers," Levin said.

Over the course of the panel's 18-month investigation into Goldman, which has included two subpoenas, committee aides said they had obtained around two million documents. Asked if the panel had met with witnesses such as Tourre over the weekend, an aide would only say that they have met with a number of Goldman executives over the past few weeks.

On Tuesday morning the panel's much-anticipated hearing will start at 10 a.m. with witnesses including Blankfein, Tourre, and five others from the firm.

Levin today said he will wait until after the hearing to decide whether to refer the panel's findings to the Justice Department and the SEC for possible criminal charges.

Also today, the Michigan lawmaker responded to the firm's accusations that the panel had cherry-picked certain documents to portray the bank in a negative manner.

"We believe that the documents we present fairly and accurately describe what happened," he said.

And he added that Goldman, in his mind, was not alone in its actions.

"We think a number of banks engaged in similar conduct."

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