WASHINGTON, United States — TOP Goldman Sachs officials defended their conduct in the financial crisis yesterday, flatly disputing the government’s fraud allegations against the giant financial house. “I did not mislead” investors, insisted a trading executive at the heart of the government’s case.

But they ran into a wall of bipartisan wrath before a Senate panel investigating Goldman’s role in the financial crisis and the Securities and Exchange Commission fraud suit against it and one of its traders. Democratic Sen Carl Levin of Michigan accused Goldman of making risky financial bets that “became the chips in a giant casino”.

The hearing comes as President Barack Obama and Democratic lawmakers are trying to push through a financial regulations overhaul that they hope will win over voters ahead of November congressional elections. The legislation would crack down on the kind of lightly regulated housing market investments that helped set off the crisis.

Fabrice Tourre, a 31-year-old trader at Goldman and the only company official directly accused in the SEC suit — testified that he does not recall telling investors that a Goldman hedge fund client had bought into an investment that soured. Instead, the hedge fund, Paulson & Co, bet against the security — and profited handsomely.

“I deny — categorically — the SEC’s allegation,” Tourre said. “And I will defend myself in court against this false claim.”

Federal regulators said Tourre marketed an investment designed to lose value. In a brash January 2007 e-mail, Tourre called himself “The fabulous Fab… standing in the middle of all these complex… exotic trades he created.”

About a half-dozen protesters were in the committee room, dressed in prison stripes with names on signs around their necks of Tourre and Goldman CEO Lloyd Blankfein, who was also scheduled to testify.

“Fabulous Fab is not so fab when he takes from the poor,” the protesters spoke as a chorus before the hearing started. “We want to see these guys behind bars.” They hissed at times during the testimony.

Ten days after the SEC action, the panel is looking into allegations that Goldman used a strategy that allowed it to profit from the housing meltdown and reap billions at the expense of clients.

Levin, the committee chairman, said actions by Goldman Sachs wreaked havoc on the economy. “Its conduct brings into question the whole system of Wall Street,” Levin said of the investment banking firm, one of the few to emerge from the financial crisis larger and stronger than before.

Levin pressed Daniel Sparks, the former head of Goldman’s mortgages department, on whether the company felt it had a moral obligation to disclose to clients that it was making side bets against the same risky investments it was selling them.

Sparks said that the clients “should look at the assets themselves” that made up the mortgage-based securities they were buying. “Clients who did not want to participate in that deal did not,” he said of one particular transaction.

Levin shot back: “I don’t think you want to answer. You’re not going to answer the question, it’s obvious.”

Levin accused Wall Street firms of selling securities to clients that they wouldn’t invest in themselves. That’s “unbridled greed in the absence of the cop on the beat to control it”, he said. The overhaul bill would “put a cop back on the Wall Street beat”.

Criticism of Goldman’s behaviour came from both sides of the aisle.

Sen Susan Collins of Maine, the top Republican on the panel, said Goldman officials were “celebrating the collapse of the housing market when the reality for millions of Americans is loss of homes and disappearing jobs”.

“There is something unseemly about Goldman betting against the housing market at the same time it is selling to its clients mortgage-backed securities of toxic loans,” she said.

Sen John McCain, an Arizona Republican, said that while there may not be proof that Goldman did anything illegal, a reading of e-mails from Goldman officials bragging about profiting from bets against the housing market showed “there’s no doubt their behaviour was unethical and the people will render a judgement as well as courts.”

And Sen Claire McCaskill, a Missouri Democrat, accused Goldman of “pure and simple raw gambling”.

Goldman is accused of reaping billions at the expense of clients.

Goldman executives misled investors in complex mortgage securities that turned bad, investigators for the panel say. They pointed to a trove of some two million e-mails and other Goldman documents obtained in an 18-month investigation. Excerpts from the documents were released Monday, a day before the hearing bringing Blankfein and others before the panel.

Blankfein said in his prepared testimony that Goldman didn’t bet against its clients and can’t survive without their trust.

The SEC says Goldman concocted mortgage investments without telling buyers they had been put together with help from a hedge fund client, Paulson & Co, that was betting on the investments to fail. The agency also charged Tourre.

Goldman disputes the charges and says it will contest them in court.

Blankfein repeated the company’s assertion that it lost US$1.2 billion in the residential mortgage meltdown in 2007 and 2008 that touched off the financial crisis and a severe recession.

He also argued that Goldman wasn’t making an aggressive negative bet — or short — on the mortgage market’s meltdown.

“We didn’t have a massive short against the housing market, and we certainly did not bet against our clients,” Blankfein said. “Rather, we believe that we managed our risk as our shareholders and our regulators would expect.”

But Levin asserted: “I think they’re misleading the country.”

Goldman has fought back against the fraud charges with a public relations blitz aimed at discrediting the SEC’s case and repairing the bank’s reputation. Some big clients are publicly backing the firm. But its stock has yet to recover from the fall that followed the SEC lawsuit on April 16.

The Senate panel provided excerpts of e-mails showing a progression from late 2006 through the full-blown mortgage crisis a year later. Levin said they show Goldman shifted in early 2007 from neutral to a short position, betting that the mortgage market was likely to collapse.

“That directional change is mighty clear,” Levin said. “They decided to go gangbusters selling those securities” while knowing they were sour.

“We have a big short on,” Tourre wrote in a December 2006 e-mail.

Daniel Sparks, a former head of Goldman’s mortgages department, wrote to other executives in March 2007, “We are trying to close everything down, but stay on the short side.”