Lloyd Blankfein was on the hot seat this morning as chairman Phil Angelides opened the financial crisis commission hearing with a relentless grilling of the Goldman CEO. After asking why Goldman created CDOs, sold them, and then immediately shorted them, he said, “It sounds to me a little bit like you’re selling a car with faulty brakes, then buying an insurance policy on the buyer of those cars.” Blankfein responded that everyone buying the product was a professional investor—who, Angelides broke in to point out, were “representing pension funds that have the life savings of police officers.”
When Blankfein likened the excessive risk Goldman and other firms were carrying to a hurricane, Angelides retorted: "Having sat on the California hurricane board, I can tell you hurricanes are an act of God, this was an act of men." When Angelides asked if Goldman’s practices were “negligent,” Blankfein replied that they were “typical.” When the talk turned to bailouts, Blankfein said the company wasn’t reliant on them, but took them to manage risk. He also said that no one asked him directly to take a haircut on the money AIG owed the firm.