Did Goldman's Ex-Mortgage Guru Lie Under Oath?

[TacticalPeek]

Did Goldman's Ex-Mortgage Guru Lie Under Oath?

Daniel Sparks told Congress he didn't expect a group of financial products to fail. Internal documents suggest he knew otherwise.

— By Andy Kroll

During Tuesday's 10-hour grilling of past and present Goldman Sachs executives and traders before a Senate subcommittee, the questioning frequently centered on four mortgage-related products the company had sold to investors as the subprime market was about to implode. At one point, an indignant Sen. Jon Tester (D-Mont.) said, "Every one of these looks like a wreck waiting to happen." And he asked Daniel Sparks, the former head of Goldman's mortgage department, how he "in good faith" could peddle these mortgage-related products to clients when it was clear the mortgage market was close to complete collapse—and when Goldman itself had begun "shorting," or betting against, this very same market. Sparks—whose overall evasiveness drew the ire of Senate investigations subcommittee chair Carl Levin (D-Mich.) and other lawmakers—replied: "At the time we did those deals, we expected those deals to perform." Numerous documents released by the subcommittee, however, indicate that Sparks, who left Goldman in the spring of 2008, and his former employer knew otherwise. And his testimony raises a serious question: whether he lied to Congress under oath.

The four doomed deals were put together or sold between December 2006 and late April 2007. Each involved an exotic product called a synthetic collateralized debt obligation (CDO), made up not of mortgage-backed bonds but instruments that merely referenced and reacted to the performance of a set of mortgage bonds. Each would become a spectacular failure, mostly winding up in junk status and rendered nearly worthless. One of these deals was Abacus, which is the focus of the Securities and Exchange Commission's (SEC) billion-dollar fraud case against Goldman and company vice president Fabrice Tourre. That suit alleges that the firm deliberately created and sold what amounted to a ticking time bomb—a subprime mortgage-based product that was designed to go bust—and didn't tell investors that a hedge fund trader betting against Abacus had influenced the product's creation.

As it was making those deals, Goldman was taking a far more negative view of the mortgage markets. So the issue is, what did Sparks know and when did he know it? More precisely, did he—could he—really expect these deals to do well when Goldman was peddling them to customers?

http://motherjones.com/politics/2010/04/daniel-sparks-goldman-sachs-hearing

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Let a grand jury decide.

[Scuba]

1. "Let the grand jury decide" is well said

Americans should march in the streets and ask for justice. I'll be the Tea Party will lead the way.

[hobbit709]

2. Does the sun rise in the east?