Goldman Sachs will come in for harsh criticism from an influential US Senate report into the financial crisis that will highlight alleged conflicts of interests in the bank’s dealings with clients, according to people familiar with the matter.
Goldman on Tuesday released a long-awaited list of internal changes that it hoped would help to put its recent controversy behind it.
As part of the reforms, Goldman revealed it had lost more than $15 billion on investments with its own capital in 2008 – a previously undisclosed figure that supports the bank’s contention that it did not profit from the financial meltdown.
But people familiar with the matter said the report from the Senate permanent subcommittee on investigations, which could be published by the end of the month, would renew pressure on Goldman by focusing on complex transactions similar to a deal involving a mortgage-linked security called Abacus.
Goldman declined to comment. Mr Levin’s office also declined to comment.
The Abacus dealprompted the Securities and Exchange Commission to pursue civil fraud charges that Goldman settled by paying a $550 million fine in July.
The regulators alleged Goldman did not disclose to clients that a hedge fund eager to short the housing market had influenced the type of loans included in the security.
Senior Democrats hope the new report, which deals with Wall Street’s behaviour during the crisis but is believed to focus heavily on Goldman, will press the SEC to reopen its investigation into the bank.
Carl Levin, the committee’s chairman, cross-examined Goldman’s top executives at hearings last year and congressional staff are circulating a draft of a report that draws on the hearings and thousands of pages of documents provided by the bank.
The Goldman report into ways to improve practices and financial reporting, carried out by its business standards committee, suggests clients and employees have expressed concern over the bank’s way of doing business.
A four-month survey of 200 Goldman clientsfound that some customers believed that, “in some circumstances the firm weighs its interests and short-term interests too heavily”, the report said.
The SEC settlement with Goldmaninfuriated some of the bank’s critics in Congress, who believed the case should have gone to court. Some of Goldman’s supporters, who believed the case had no merit, were also disappointed.
Mr Levin’s committee is due to publish at about the same time as a Financial Crisis Inquiry Committee report that will also examine the behaviour of Goldman and other Wall Street firms.
Additional reporting by Kara Scannell in London.