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Goldman Execs: Just Managing Risk, Senators!

Judging from the prepared remarks of the Goldman Sachs executives appearing on Capitol Hill Tuesday, the company focuses more on 'managing risk' than making money.
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Goldman Sachs

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released the prepared testimony of the seven current and former executives who will appear before a Senate subcommittee Tuesday, and they all say pretty much the same thing.

Six current and former Goldman big shots, including CEO Lloyd Blankfein and CFO David Viniar, repeatedly say they were not betting against their clients or the housing market, as the Securities and Exchange Commission and subcommittee chairman Carl Levin (D., Mich.) have accused them of doing. Instead, they were managing risk so that they could keep the markets functioning efficiently and fulfill their clients' needs.

"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," states the Blankfein testimony.

Viniar's statements sound a similar note. "For Goldman Sachs, weathering the mortgage market meltdown had nothing to do with prescience or "betting" on -- or against -- anything. More mundanely, it had everything to do with systematically marking our positions to market, paying attention to what those marks were telling us, and maintaining a disciplined approach to risk management, which we believe served the firm, our clients, and our shareholders well during this extraordinarily challenging period."

Goldman Sachs executives, including Fabrice Tourre (far right), gather before the start of Tuesday's hearing.

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So do those of Craig Broderick, Goldman's Chief Risk Officer. "Our objective was to flatten risk, and in this regard we were relatively successful," his testimony reads.

Same goes for the statements of Michael Swenson, managing director in the mortgage department. "We were instructed to reduce risk and get the position "closer to home"; we were not told what direction to take - just to get there."

Got the idea?

Call me a panderer to the overwhelming public hatred of Goldman, but I don't think this testimony tells the whole story. In documents it released Saturday, Goldman published revenue figures that it says were "related to residential mortgages," in order to demonstrate that, as Blankfein puts it in his testimony, "during the two years of the financial crisis, while profitable overall, Goldman Sachs lost approximately $1.2 billion from

its activities in the residential housing market."

Goldman Sachs spokesman Samuel Robinson told me via email that these figures include fees paid to Goldman from putting together mortgage-related securities like Abacus 2007-AC1.

So how did Goldman make nearly $14 billion combined in 2007 and 2008? Let's hope Tuesday's Senate hearing sheds some light on this question.


Written by Dan Freed in New York