Blankfein: Goldman must recognize doubters
NEW YORK/WASHINGTON |
NEW YORK/WASHINGTON (Reuters) - Goldman Sachs Group Inc Chief Executive Lloyd Blankfein took responsibility for the bank's conduct during the financial crisis on a call with wealthy clients on Wednesday.
Blankfein said in the call that Goldman must "recognize that we put ourselves in a position where people can raise those types of doubts," according to excerpts of a recording of the call broadcast on CNBC.
"We not only have to deal with the doubts, we have to analyze what we did and how we performed that got us into this place," he said.
Goldman, Wall Street's dominant firm, is facing fraud charges from the U.S. Securities and Exchange Commission, which has accused the bank of failing to tell investors that the securities underlying a so-called synthetic collateralized debt obligation were chosen by a short-seller, John Paulson, whose fund was betting the CDO would lose value.
Separately on Wednesday, Jon Corzine, a one-time Goldman CEO, downplayed the charges, saying it is "hard to see" how Goldman could have broken the law.
Still, Goldman has also drawn the attention of a Senate subcommittee and is facing a Justice Department criminal investigation, according to sources, and shareholder lawsuits.
The Financial Industry Regulatory Authority also has opened an investigation into Goldman's failure to report the Wells Notice that it received in September regarding trader Fabrice Tourre, a person familiar with the matter said on Wednesday.
Goldman was required to report the notice - which signals the likelihood of SEC charges - within 30 days of receiving it, but did not disclose it to FINRA until this week, the source said.
Goldman and FINRA declined to comment on the issue.
Fitch Ratings changed its outlook on Goldman to "negative" from "stable" on Wednesday, saying regulatory probes could hurt the bank's reputation and ability to generate revenue.
"Goldman's franchise and market position are potentially vulnerable to scrutiny by stakeholders, and like peers, may be affected by the industry's regulatory evolution," Fitch said in a statement.
Blankfein has done a number of media interviews over the past week, and top Goldman executives have been meeting more frequently with clients and investors as the company confronts accusations that it has conflicts of interests.
Blankfein, on the call with private wealth management clients, said the increased communication with clients is the silver lining of the scrutiny facing the company and that he should have done more calls earlier, according to The Wall Street Journal.
Blankfein said it is very hard to avoid the appearance of conflicts of interest.
"We shouldn't shy away from the fact that there are conflicts in this business and the potential for conflicts and that what we do is manage conflicts," Blankfein said, according to the CNBC broadcast. "It's not the conflicts, but how you manage the conflicts that shows your quality and your character."
Corzine, a former New Jersey governor and U.S. senator, told a conference in Washington that he questions the merits of the case against Goldman.
"It's hard to see where the law was broken and I question whether there were choices on ethics that were breached," Corzine said. "It's very hard to understand how you turn that into a legal case."
Corzine said he expects that Goldman will "self-correct" in light of the scrutiny of the company.
"It seems to be that because Goldman Sachs has been as successful as it is has been, it has ended up being the overall proxy for problems in the mortgage market," Corzine said.
(Reporting by Steve Eder; editing by John Wallace, Bernard Orr, Matthew Lewis and Carol Bishopric)
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