Sen. Levin Calls Goldman Sachs Allegations 'Deeply Troubling'

Goldman, Krumholz said, was the second largest contributor to the Obama campaign last year, giving nearly $1 million.

"They're trying to make sure they have a foot in the door for the time when they need it, such as now," she added. "They're not going to waste this moment and pull back on their efforts in Washington. I expect that we'll see growth, if not a surge, in both contributions and lobbying once these numbers are available."

Why Tourre Is Talking

The hearing comes a little more than a week after the Securities and Exchange Commission filed a civil lawsuit against Goldman, alleging that the firm defrauded its investors.

The SEC's claim states that Goldman Sachs structured a collateralized debt obligation (CDO) -- an instrument tied to the performance of certain securities -- that was secretly designed to fail and that the firm failed to disclose that to its investors. Paulson & Co., the hedge fund that helped pick the investment's portfolio, later made $1 billion by betting against the deal.

Goldman has denied the charges. Tourre, now an executive director in Goldman's London office, is the only individual defendant named in the SEC's suit.

With civil charges pending against him, it might be smart for Tourre to keep his mouth shut or plead the Fifth when he appears before a Senate subcommittee along with his fellow Goldman Sachs executives -- but that likely won't happen.

"It would be a public relations nightmare for Goldman for him to take the Fifth," said John Coffee, a professor at Columbia Law School who frequently testifies before Congress on securities law. "Their style is to come out fighting and say they did nothing wrong, and taking the Fifth is seen as admission of guilt by the public."

Goldman E-mails Figure in SEC, Senate Investigations

Coffee and others say that Tourre will feel pressure to speak up and defend himself and Goldman because the investment giant is likely covering his legal bills and because, with so much negative publicity surrounding him, the 31-year-old trader would be hard-pressed to find employment elsewhere.

"He's not very bankable right now," said white collar criminal defense lawyer Charles Miller. "I doubt if anybody would hire him, no matter what happens" at the hearing.

Tourre made headlines earlier this month after the SEC's lawsuit revealed an e-mail from him that seemed to indicate he didn't fully understand the complex deals he was making.

"More and more leverage in the system, The whole building is about to collapse anytime now...Only potential survivor, the fabulous Fab(rice Tourre) ... standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities (sic)!!!" Tourre wrote to a friend in January 2007, according to the SEC's complaint.

The Senate subcommittee has released additional e-mails related to the deal Tourre worked on in recent days.

In an e-mail exchange between Tourre and Daniel Sparks, the former head of Goldman's mortgage department, 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."

Levin said the documents show that Goldman knew that Paulson had designed the portfolio and bet against it.

Blankfein addressed the SEC lawsuit in his prepared testimony.

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