Goldman Sachs and Co. agreed in July to pay $550 million to settle civil fraud charges over similar accusations.
Sen. Carl Levin, D-Mich., said Wednesday the subcommittee has found new evidence that shows Goldman's misleading of investors went beyond that one case. He raised doubts about the testimony given last year by a half-dozen Goldman executives. Goldman CEO Lloyd Blankfein was among those who testified.
Goldman spokesman Michael DuVally said the testimony given by the executives was "truthful and accurate" and that the subcommittee's report confirms that.
The report released Wednesday notes that Goldman marketed four sets of complex mortgage securities to banks and other investors. But it says the firm failed to tell them that the securities were very risky, secretly bet against the investors' positions and deceived the investors about its own positions to shift risk from its balance sheet to theirs.
At the hearing last year by the Senate panel, Goldman executives were questioned about the deals. Company e-mails showed Goldman employees deriding the securities as "junk" and "crap."
Goldman CEO Lloyd Blankfein said the company didn't bet against its clients, and couldn't survive without their trust. The company lost $1.2 billion in the mortgage meltdown in 2007 and 2008 that touched off the financial crisis and the worst recession since the 1930s, Blankfein testified. He also insisted that Goldman wasn't making an aggressive negative bet - or short - on the mortgage market's slide.
The company's short positions were mostly offset by long holdings of the securities, the executives said at the hearing.
The new subcommittee report cites internal Goldman documents that it says contradict that assertion.
"I believe they misled the Congress," Levin told reporters. Goldman "gained at the expense of their clients and they used abusive practices to do it," he said.
DuVally, the Goldman spokesman, said that while the company disagrees with many of the report's conclusions, "We take seriously the issues explored by the subcommittee. We recently issued the results of a comprehensive examination of our business standards and practices, and committed to making significant changes."
Goldman agreed last summer to pay $550 million to settle civil fraud charges by the Securities and Exchange Commission of misleading buyers of mortgage-related securities. The agreement applied to one of the four deals cited by the Senate subcommittee.
The report culminates a two-year investigation by the panel, which examined millions of documents and interviewed scores of executives, traders and salespeople.
It portrays "a financial snake pit rife with greed, conflicts of interest and wrongdoing," Levin said.
The panel cited four key areas of causes of the financial crisis:
-Risky mortgage lending as exemplified by Washington Mutual, which became the biggest U.S. bank ever to fail in September 2008.
-The failure of regulators to clamp down on lending abuses and risky conduct at banks in the years leading up to the housing bust and financial crisis.
-The AAA ratings given by the big credit rating agencies to high-risk subprime mortgages that later went bad and helped cause the housing bust.
-The role of investment banks like Goldman Sachs and the finance deals they put together, which flooded the markets with risky securities.
The report also urges federal regulators to make several changes, such as a strong ban on conflicts of interest for investment banks and other financial players. It says the financial overhaul law enacted last year in response to the crisis could help prevent future abuses.
"At the heart of the financial crisis were unresolved, and often undisclosed, conflicts of interest," Sen. Tom Coburn of Oklahoma, the panel's top Republican. "Blame for this mess lies everywhere from federal regulators who cast a blind eye, Wall Street bankers who let greed run wild, and members of Congress who failed to provide oversight."
Levin said the panel planned to convey findings to the Justice Department and the Securities and Exchange Commission for possible further investigation.