"It's gambling, pure and simple, raw gambling," said Sen. Claire McCaskill, D-Mo. "They're called synthetic because there's nothing there ... you think you're so smart? Any street gambler would never place a bet with a bookie or a house that has the record that this committee has uncovered."
Goldman, Levin said, made billions by betting against the market and didn't disclose the bets to their customers who were buying their securities.
"I think people who buy bonds and securities have a right to expect that the people who are selling those bonds want them to succeed," Levin said, and by betting against the market it helped create, Goldman "dumped a lot of toxic mortgaged-backed securities and mortgage-related securities into that market. It helped to create a huge housing bubble with the synthetic instruments, these exotic instruments that they created. And so, there's some real responsibility here, it seems to me."
Goldman's profits rose considerably after the financial collapse in 2007, just as other investment banks saw a drop.
In prepared testimony released Monday, Blankfein defended the firm and said the allegations are false.
"We didn't have a massive short against the housing market and we certainly did not bet against our clients. Rather, we believe that we managed our risk as our shareholders and our regulators would expect," he said.
Blankfein said while Goldman did find the last two years of the financial crisis to be profitable, it lost about $1.2 billion "from activities in the residential housing market."
Blankfein will be walking a fine line: defending his firm's actions while acknowledging public anger over its actions.
In his prepared remarks the 31-year old trader Tourre explains what happened with the ABACUS 2007-AC1 transaction that is the basis for the SEC's fraud charges.
Tourre states that the transaction "was not designed to fail," and that Goldman lost $100 million on it. He also claims that ACA – one of the investors in the deal – "had sole authority" for picking the securities that went into the portfolio, and that ACA was informed that the hedge fund Paulson & Co. was expected to make a negative bet on it.
"They're in crisis mode," William Cohan of Fortune Magazine and author of "House of Cards," told "Good Morning America's" George Stephanopoulos today. "He's trying to be conciliatory. He's trying to finally tell the American people that he's grateful for what they did but, they're in a very difficult position."
Levin's committee has forced Goldman to turn over 2 million pages of documents that Levin said proves his case and shows that Goldman overall made $3.7 billion from the financial crisis.
"We're going to ask them some very tough questions and hope that they give us candid answers," he said.
Goldman Sachs isn't exactly used to the hot seat. It may be the most successful investment bank in history, and the most politically connected. Goldman executives have served on Capitol Hill and in the White House, and as treasury secretaries for Democrats and Republicans. They've also given massive amounts of political donations, much of it to Democrats.
"Goldman Sachs is a powerhouse on a level all together different from a vast majority of political players and they've given $31 million over the last 20 years," said Sheila Krumholz, executive director at the Center for Responsive Politics.