Goldman Sachs misled clients and US lawmakers about its bets on securities tied to the housing market, Senator Carl Levin, chairman of the US Senate panel that investigated the causes of the financial crisis, said, according to media reports.

In January this year, such a condemnation of the Wall Street investment bank was expected. The bank had been accused of not telling clients that a hedge fund eager to short the housing market had influenced the type of loans included in a collateralized debt obligation security.

"While we disagree with much of the report, we take seriously the issues explored by the Subcommittee. We recently issued the results of a comprehensive examination of our business standards and practices and committed to making significant changes that will strengthen relationships with clients, improve transparency and disclosure and enhance standards for the review, approval and suitability of complex instruments," a Goldman Sachs statement that was emailed to this publication said.  

Levin was quoted saying that he wants the Justice Department and the Securities and Exchange Commission to examine whether Goldman Sachs violated the law by misleading clients who bought such CDOs without knowing the firm would benefit if they fell in value.

Last year, when the alleged misconduct of the Wall Street investment titan came to light, figures in the wealth management industry said there may be some negative fallout for the wealth management side of the Goldman Sachs business, but as far as can be measured, the firm has suffered no such impact.

The issue highlights the potential conflicts of interest that can arise when a large investment bank sells securities to investors while simultaneously hedging against any adverse movements in the prices of such securities.

Levin, a Michigan Democrat, also said federal prosecutors should review whether to bring perjury charges against Goldman Sachs chief executive Lloyd Blankfein and other current and former employees who testified in Congress last year. Levin said they denied under oath that Goldman Sachs took a financial position against the mortgage market solely for its own profit, statements the senator said were untrue.

“In my judgment, Goldman clearly misled their clients and they misled the Congress,” Levin was quoted saying at a press briefing yesterday where he and Senator Tom Coburn, an Oklahoma Republican, discussed the 640-page report from the Permanent Subcommittee on Investigations.