mr. blankfein, we're going to go in alphabetical order. mr. blankfein, please proceed. >> thank you chairman angelides, vice chairman thomas and members of the commission. thank you for the opportunity to contribute to the commission's work to understand the causes of the financial crisis. gold pan sacks was established 141 years ago. we are an institutional focused firm, providing investment banking, market making, and investment management services to corporations, institutions, governments, and high net worth individuals. as an underwriter, we help our clients access equity in debt capital markets, in order to grow their businesses. as an adviser, we assess and facilitate strategic options for mergers and acquisitions. we provide the necessarily quid it's, as market makers, to ensure that buyers and sellers can complete their transactions and securities markets can function efficiently. and as an asset manager, we help public and private pension funds, corporations, not for profit organizations and high net worth individuals plan, manage, an

mr. blankfein.hen the government supported aig and enable them to close out their exposures to risk that aig. did anyone ask you any point to take anything less than one under% on the dollar? -- 100% on the dollar? >> i never got a request by self -- myself about taking less. it did not come up in any conversation that i can recall. subsequently, somebody in my organization who was going back and forth with -- this was after the ad shi'a, a couple of months later, at the time whenever closing out -- when they were closing out the maiden lane ii, that these contain the inference that he drew, would you be willing to take less? and he said he could not answer that question now. himself, at his level. he then said that it never came back up again to him. and it never came back to me. >> did he further that question up the chain of command? >> i can say that i did not get it. he might have told his boss. >> could we talk a little bit about your interactions with the regulators, in particular, when you t

mr. blankfein.lk a little bit about when the government supported aig and enable them to close out their exposures to risk that aig. did anyone ask you any point to did anyone ask you any point to take anythin >> but never got a request myself about taking less. it did not come out in a conversation i can recall. someone in my organization, after the aig, a couple of months later, told me he got a question containing the inference, would you be willing to take less, and he said he could not answer the question, and he then said it never came back to him, and as i said, it never came back to me. did he further that question up the chain of command? >> i can say that i did not get it. he might have told his boss. >> could we talk a little bit about your interactions with the regulators, in particular, when you think back on the events of 2007-2008, there were obviously a lot of people that participated in risk-management either internally or a externally regulators, there is internal auditors, and ext

mr. blankfein.r firm about 10 years ago changed from being a partnership to a publicly held corporation. now you have changed again to a bank holding company. how would your approaches to performance evaluation changed, or have they, as you change the structure of goldman sachs? >> i think we tried very hard to keep the partnership ethic. there are elements of our compensation scheme that might be a little different to suit our culture and history. it might not suit everyone. for example, no one at goldman sachs gets paid solely at his or her own performance. not traders, not sales people, everyone gets paid on the basis of a firm as a whole, their business unit, and we take account of their performance, but the opted for us is to keep going with that spirit of partnership and cooperation and teamwork, and also by the way, an incentive for everyone to surveil everyone else around them, because everyone is responsible for everyone. that would be a distinctive element of our structure. in terms of loo

mr. blankfein. when was goldman first renault -- alerted the fact that there were serious problems with subprime mortgages? >> i would have to look back. i wasn't at all focused on end until -- new don >> goldman was early to recognize the dangers according to reports, and began to use indexes to protect itself. >> know, first of all, we have research which we will make available that showed -- published research to the world that we were very negative on the housing market's going backed away before 2007 and 2006. our movement in the mortgage market was for us a matter of hedging in managing our risks, because as a syndicator of products, we were usually in the position of finding ourselves long, much like banks that had problems and accumulated, our management protocols to sell down those positions or else stop at servicing clients to one of the syndicate those pools of loans. -- who wanted to syndicate those pools of loans. we wanted to moderate our risk, and you use the term, going short. what w

mr. blankfein said it, but mr.imon and all the people here who have testified this morning are extending loans, covenant light loans in leveraged buyouts. well, who would think that was a good idea? was that equity or was that data? that's the question. if you don't have to repay it, if you violate a covenant, is it actually debt even if you have to repay it at the end? maybe it isn't. >> i like to make two observations. two quick observations on the. the first one is i agree with mr. solomon about the tax structure. i think it's very appropriate the way it stands today. i think that when you look at the banking business there were securities that were considered to be hybrid securities. they were not equity, were not get. banks could raise hybrid securities it in forms designate as trust preferred. they got to raise that money and yet it didn't impact their total indebtedness. so it was -- wasn't equity, was a desiccated that i think what you're asking, should we draw lines that i think we should all lies between,

mr. blankfein.n was goldman first renault -- alerted the fact that there were serious problems with subprime mortgages? >> i would have to look back. i wasn't at all focused on end until -- new don >> goldman was early to recognize the dangers according to reports, and began to use indexes to protect itself. >> know, first of all, we have research which we will make available that showed -- published research to the world that we were very negative on the housing market's going backed away before 2007 and 2006. our movement in the mortgage market was for us a matter of hedging in managing our risks, because as a syndicator of products, we were usually in the position of finding ourselves long, much like banks that had problems and accumulated, our management protocols to sell down those positions or else stop at servicing clients to one of the syndicate those pools of loans. -- who wanted to syndicate those pools of loans. we wanted to moderate our risk, and you use the term, going short. what we we

mr. blankfein, intent to make that request of the other institutions and also to ask for that report.i would ask each of your entities whether, in the wake of what appears to be asked certainly a potential, a colossal failure of the regulatory oversight of this nation, of our financial system, has the sec done an internal review audit investigation of what came apart, number one, and if so, can we have that document? >> i can say there have been multiple internal reviews of slices of the financial crisis. bear stearns, the credit rating agencies and others. so we're happy to share that information. is important to me as well because as the new leader of the sec and having brought in new leadership across the agency, i want everybody informed by the things that didn't work out well so that we can make the appropriate changes going forward and we can build a much stronger regulatory program, across the board and across the whole agencies. >> ms. bair? >> yes, we have an ongoing self-examination. we've made a number of changes and i would be happy to give you a written document that desc

mr. lloyd blankfein about that yesterday. was it the decision that the sec that affected that?>> it is my understanding that the investment bank holding companies are subject to any capital regulation prior to 2004. they did under the csc according to the basel ii program should be subject of intense scrutiny here. the changes that the sec made related to broker-dealer network a. shame. >> i think what i'm doing is referring to -- this is really yours a meant ms. bair, page are doing at your testimony when you say for example, 2005 -- i think it was 2004, but you say the sec allowed large brokerage dealers to develop their consolidated forecast that are both. i think you go on to say that in 2008, two of the finest additions using the capital rules collapsed. i just want your opinion to both of you as whether the recent capital standards in fact were seminal? >> i think what happened here, chairman schapiro is right. the csp framework advantage appropriate for capital. we be fdic has been a very strong opponent of those rules and we blocked so far frankly than being used by the

mr. lloyd blankfein and intend to make it to the others, and to ask for the report. i would ask each of your entity's weather in the wake of what appears to be suddenly as a potential colossal failure of the regulatory oversight of this nation, of our financial system, has the sec done an internal review, audit, investigation of what came apart? and if so, can we have that document? >> i can tell you there have been multiple internal reviews concerning the financial crisis. credit rating agencies, bear stearns, others. we're happy to share it. it is also important to me because as the new leader of the sec having brought in new leadership across the agency i want everyone informed by things that did not work out well. so that we can make appropriate changes going forward and build a stronger program across the board and across all agencies. >> yes, we have an ongoing self -examination. we have made a number ofi changes number would be happy to give your written document describing the. when banks fail there is always a review of supervisory process. one piece missing