Goldman traders get grilled and its stock jumps

Senate Investigations subcommittee Chairman Sen. Carl Levin, D-Mich., lifts a binder of exhibit documents on the role of investment banks on the Wall Street financial crisis, ahead of the Goldman Sachs hearings. Photo: AP

Goldman Sachs executives emerged mostly unscathed from a Senate grilling. The company’s stock did even better.

Goldman Sachs Group Inc. outperformed most other stocks Tuesday as a Senate subcommittee questioned Goldman employees about complex mortgage deals that led to government civil fraud charges. The stocks rose as much as $4.16 before pulling back to close at $153.04, up $1.01, or 0.7 percent. Still, it was the only major banking stock to end higher amid a market plunge.

Some analysts saw Goldman’s stock rally as a sign that the bank had the upper hand during senators’ confrontational, five-hour questioning of four current and former Goldman employees. One of those employees was Fabrice Tourre, the trader charged along with Goldman in the Securities and Exchange Commission’s fraud case.

The Senate Permanent Subcommittee on Investigations was continuing its questioning of other Goldman executives. CEO Lloyd Blankfein was testifying later Tuesday.

“Despite the interrogation, the Goldman team hasn’t really provided any new information,” independent market analyst Edward Yardeni said. “And the senators aren’t creating a more damaging view than already existed.”

The SEC sued Goldman on April 16, sending the stock down 13 percent and erasing $12.5 billion in market value.

Goldman’s upturn puzzled some traders at the New York Stock Exchange, where the Senate hearings were on virtually every TV screen. Most U.S. stocks fell Tuesday after ratings agency Standard & Poor’s downgraded the debt of Greece and Portugal.

“I was a little surprised. The stock held its own,” said Jonathan Corpina, president of Meridian Equity Partners and an NYSE floor trader. “Still, it’s been beaten up a lot over the past few days, so the rest of the market may be catching up.”

Others analysts suggested that the Goldman executives simply were better prepared than their Senate counterparts, leading investors to bet that the bank will be able to manage its legal problems.

Several members of the panel struggled to both formulate questions about Goldman’s complex mortgage transactions and get answers to their liking.

“Bottom line, the senators don’t have a consistent, coordinated legal approach - which is kind of what you’d want from an investigation subcommittee - and the Goldman guys do,” said Nomi Prins, a former Goldman Sachs employee who has been a critic of the bank’s practices and later wrote a book about the financial crisis.