Goldman Sachs' Tourre defends bank in Senate testimony

Goldman Sachs' vice president, who is alleged to have helped create and sell a mortgage investment that figures in a fraud suit by the US Securities and Exchange Commission (SEC), has denied that he failed to disclose crucial information to investors.

"I deny - categorically - the SEC's allegation. And I will defend myself in court against this false claim," Fabrice P Tourre, executive director of structured products group trading for Goldman Sachs, said in his testimony before the Senate Permanent Subcommittee on Investigations in Washington today.

The investment banking giant has been sued by the SEC on 17 April for defrauding investors in a transaction known as Abacus 2007-AC1 (See: Goldman Sachs sued by US regulator for securities fraud).

However, the bank believes that the fraud charges are politically motivated (See: Goldman's Blankfein readies for Senate testimony: report).

The subcommittee believes that the bank had not devised just one of the deals, but a series meant to profit from the collapse of the home mortgage markets. According to the subcommittee chairman, Senator Carl Levin, a Michigan Democrat, the hearing would focus on the role of investment banks in the financial crisis, focusing particularly on the activities of Goldman Sachs in 2007, which "contributed to the economic collapse that came full-blown the following year."

While the hearing has ramifications for the entire sector and the activities of lenders to make more money from risky mortgage loans, he added, it was focusing on Goldman as an "active player in building this mortgage machinery."