HARTFORD, CT — Gov. Ned Lamont’s nominee for the Department of Economic and Community Development tried to tackle the criticism that in his capacity at Goldman Sachs he somehow knowingly contributed to the mortgage crisis a decade ago.
David Lehman, 41, spent two hours answering questions Tuesday from lawmakers both about his past and about his future.
Ultimately his future depends on whether the Senate approves his nomination to the position, but the verdict is still out on his past and whether his role at the investment bank should preclude him from becoming Connecticut’s chief economic development official.
Lehman, a partner at Goldman Sachs, told the Executive and Nominations Committee that he never sold a financial product he knew was worthless.
“I did not know at the time that those securities were going to be worthless,” Lehman stressed under questioning about his position on the Structured Products Group Trading Desk and later as someone who managed a group that oversaw collateralized debt obligations, or CDOs.
Lehman said he didn’t begin overseeing the group that oversaw the CDO’s until the summer of 2007.
Rep. Michael D’Agostino, D-Hamden, said that’s an interesting time period because it’s shortly after Lloyd Blankfein, then chairman and CEO of Goldman Sachs, sent an email to staff asking if they were doing enough to sell off the “cats and dogs” of the mortgage business.
D’Agostino asked if Lehman was involved in Abacus, which was the name of the series of CDOs Goldman sold and then bet against. The Securities and Exchange Commission fined Goldman over the deal.
“I wouldn’t characterize it as the ‘Big Short’,” Lehman said.
Lehman said there should have been better disclosure at the time about where the portfolio was coming from and where the risk was sourced.
Senate President Martin Looney, D-New Haven, said the key question in Lehman’s nomination is related to his past and the role he may have played in the 2007-2008 financial crisis.
Under questioning from Looney, Lehman said when they were looking to reduce their risk regarding their exposure to the mortgage market “we didn’t know where the market was going.”
“At a high level what Goldman was doing was reducing its exposure, in aggregate, to the U.S. mortgage market,” Lehman said.
“Goldman didn’t know and I didn’t know that those securities were going to be worthless or that some of those were going to be worthless,” Lehman said.
He said all the firms that participated in the mortgage market during that time frame need to accept responsibility for what happened in the market.
“I’ve learned tremendously from that,” Lehman said. “I’ve learned a lot about what happened at that time and the need for transparency.”
Sen. Marilyn Moore, D-Bridgeport, said the questions about Goldman Sachs is the “elephant in the room.”
Looney said he hasn’t spoken to Lamont about Lehman’s nomination and he hasn’t spoken to the Senate Democratic caucus about it so he refrained from offering much more Tuesday.
Asked if he believed Lehman when he said he never knew he was selling a security that was worthless, Looney said he has not formed an opinion on that issue.
Looney declined to characterize Lehman’s testimony Tuesday.
He said he would be researching any “contemporaneous” comments Lehman made that run counter to his testimony Tuesday.
“I want to give him credit for being somebody who is very successful in the private sector and willing to volunteer for public service,” Looney said. “That’s very laudable.”
Looney said the legislature needs to do a careful analysis before it votes.
Lehman said his goal in leading the department would be to increase economic growth.
“The governor’s pro-growth and pro-jobs agenda is critically important to the future of our state,” Lehman said. “For too long we have been underperforming on economic growth and impacted by outbound migration.”
As far as economic incentives for businesses, Lehman said his department wouldn’t be looking to lead with it.
Lehman lives in Greenwich, but didn’t know Lamont before January when he reached out to the governor and volunteered his services to the state. Lehman has declined to take a salary or benefits and said he would serve indefinitely. Asked if he would stay in the job for four year, he said his tenure is up to Lamont.
He said he knows what he knows and he knows what he doesn’t know, but is eager to learn.
Eight of the nine Senators on the committee voted to send Lehman’s nomination to the Senate. Sen. Kevin Witkos, R-Canton, was absent.