Goldman Sachs told managers 'reduce risk'

WASHINGTON, April 27 (UPI) -- Three current and former Goldman Sachs employees told U.S. senators Tuesday upper management frequently instructed them to minimize risks.

Rather than tell staff to go long or short on the housing market, executives told mortgage department managers, those staking out the bank's market position during 2006 and 2007, to "get smaller, reduce risks and get closer to home," said Josh Birnbaum, former managing director of Goldman's mortgage department.

"Closer to home" was the in-house code for pulling back if Goldman's position -- long or short -- had gotten too far from neutral, the executives said.

Birnbaum and mortgage department directors Dan Sparks and Mike Swenson said the bank's position was a constantly changing reaction to positions requested by clients.

At the Goldman Sachs hearing, U.S. Sen. Carl Levin accused the investment bank of behaving as banks did in the 1920s, sparking the Great Depression.

Levin, D-Mich., said Goldman Sachs misused the system to "put its own interests and profits ahead of the interests of its clients and our communities."

"In looking at this crisis, it's not hard to echo the conclusion of another congressional committee, which found, quote, 'the results of the unregulated activities of the investment bankers were disastrous,' close quote. That conclusion came in 1934, as the Senate looked into the reasons for the Great Depression. And the parallels are unmistakable to today's events," Levin said.

Goldman has denied it helped create the mortgage market collapse by betting against the market.