Goldman Sachs (NYSE: GS) Threatened with Audit from Financial Crisis Inquiry Commission

The Financial Crisis Inquiry Commission is threatening to bring in outside accountants to audit Goldman Sachs Group Inc. (NYSE: GS)’s bank systems for data on its derivatives business, the panel’s chairman said.

Goldman Sachs Group Inc. (NYSE: GS) previously said that they do not track that information, but FCIC chair Phil Angelides said that it will not back down on demands for the information. “We have a deep level of questioning about whether we’re getting the straight scoop here and whether Goldman is working with us on information that they surely have,” said Angelides.

Angelides comments mark the latest dispute between Goldman Sachs and the FCIC, which as previously scolded the bank for its “Abysmal” response to the inquiry. The frustration of the FCIC became vident when Goldman Sachs executives told the panel that the bank’s accounting systems did not break out trading revenue generated strictly from derivatives. The firm maintained that such information would give little insight into the risks from the bank’s trading because many trades involve derivatives contracts also can include an offsetting cash security.

Angelides  said that he was skeptical that Goldman Sachs did not have derivatives information given the bank’s history and reputation for risk management through discipline in marking the value of every position on a daily basis. “It’s not credible that that’s a black hole,” Mr Angelides said. “It defies logic that these institutions have no clue of how much money they are making or losing from these derivatives.”

He said that the information was vital because it could help explain how Wall Street evolved through the use of complex derivatives. “These banks have become trading operations,” he said. “This is essential information. It’s the center of their business.”

“We’ll pursue all of our options,” Mr Angelides said. “We’re going to continue to press this very hard.”