Goldman Sachs More Responsive to FCIC After Subpoena

Goldman Sachs Group Inc. has been more responsive to information requests from the Financial Crisis Inquiry Commission since being subpoenaed and has made Chief Executive Officer Lloyd Blankfein available for an interview, the panel’s leaders said.

Blankfein was interviewed recently by FCIC staff “at length,” commission Chairman Phil Angelides said today in a conference call with journalists. Angelides said on June 7 that the panel had subpoenaed Goldman Sachs after the bank tried to hinder a probe by overwhelming the commission with documents.

“I have no question” that New York-based Goldman Sachs will now cooperate with requests, FCIC Vice Chairman Bill Thomas said today on the call. “It was the lack of specificity, or even the acknowledgement that what we asked for was in the piles of documents we got, that was cleared up.”

Goldman Sachs executives including Chief Financial Officer David Viniar will testify at a two-day FCIC hearing beginning tomorrow reviewing the role of derivatives in the recession. Also scheduled to testify is Joseph Cassano, the former American International Group Inc. executive whose bets on subprime mortgages led the insurer to the brink of collapse in 2008, requiring a U.S. bailout.

“This hearing is focused on derivatives which is a subset, obviously, of what Goldman does, and if you want to get some answers that are useful and meaningful you’d probably ask the people who were head of that subset,” Thomas said.

$12.9 Billion

After AIG’s bailout, Goldman Sachs collected $12.9 billion tied to contracts with the New York-based insurer, including derivatives.

AIG sold credit-default swaps to firms including Goldman Sachs, Societe Generale SA and Deutsche Bank AG protecting them against declines in the value of mortgages. When the housing market collapsed, AIG didn’t have enough funds to honor its contracts and turned to the U.S. for a rescue that swelled to $182.3 billion. Cassano was interviewed for about five hours.

Goldman Sachs was sued in April by U.S. regulators for misleading clients who invested in collateralized debt obligations. The Securities and Exchange Commission said that investors weren’t told that the hedge fund led by John Paulson helped pick the mortgages in the CDOs and was betting on them to fail. Goldman Sachs has said the suit is unfounded.

Goldman Sachs, the highest-paying and most profitable firm in Wall Street history, has been criticized by lawmakers as a symbol of greed and excess. AIG and failed securities firm Bear Stearns Cos. are among companies hobbled by losses on investments from Goldman Sachs.

Credit-Default Swaps

The commission is investigating the causes of the credit crisis, which followed the collapse of the housing market beginning in 2007 and sparked the worst recession since the 1930s and the loss of more than 8 million U.S. jobs. It will report its findings to Congress and President Barack Obama by December.

Derivatives such as credit-default swaps contributed to the crisis, making it difficult for regulators to understand how interconnected financial firms had become after the bankruptcy of Lehman Brothers Holdings Inc. in 2008.

To contact the reporters on this story: Matthew Leising in New York at mleising@bloomberg.net; Hugh Son in New York at hson1@bloomberg.net.

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