(Fortune) -- Goldman Sachs executives can dodge and weave all they want. Casino capitalism, the institution that made Wall Street rich at the expense of everyone else, is finally getting the grilling it deserves.
Seven current and former Goldman (GS, Fortune 500) execs, including CEO Lloyd Blankfein, testified Tuesday at a Senate hearing on the role of investment banks in the financial meltdown of 2008.
The proceedings at the Senate Permanent Subcommittee on Investigations weren't always edifying. Few questions were met with concise or on-point answers. Sen. Susan Collins, R-Maine, observed after one head-scratching exchange with a Goldman exec that "I cannot help but feel a strategy of the witnesses is to burn through the time of the questioner."
But if questioning Goldman execs often failed to produce enlightening answers, it showed the Senate is starting to put two and two together on a more important question: whether Wall Street in its current form is anything but a glorified, taxpayer-supported bookie.
It's a crucial question at a time when unemployment is near a three-decade high and members of Congress are butting heads on how to make financial regulation work.
"My sense is people feel like you're betting with other people's money and their future," said Sen. Mark Pryor, D-Ark. "You guys have less oversight than a pit boss in Las Vegas," added Sen. Claire McCaskill, D-Mo.
The hearing comes as Goldman fights a Securities and Exchange Commission civil fraud suit alleging it misled investors who quickly lost $1 billion buying subprime-related securities from the firm.
In that case, the SEC alleges, Goldman failed to tell investors that a hedge fund manager who was betting against the deal helped to pick the securities. That manager, John Paulson, walked off with $1 billion in less than a year.
Goldman execs insisted Tuesday that the firm didn't make out like a bandit by betting against its customers in the housing bust. They tried to portray the firm as a servant of its clients and society.
Blankfein, who earlier this week was dubbed "the prince of casino capitalism" by the Independent newspaper in the U.K., testified that Goldman's capital-raising, investment-advice and trading businesses are "important to economic growth and job creation."
But subcommittee chairman Carl Levin, D-Mich., pointed out that the investments at the center of the SEC case -- so-called synthetic collateralized debt obligations, or debt instruments whose performance is tied to a portfolio of derivatives such as credit default swaps -- created no value except for the Wall Street firms that grew rich ginning them up.
"Synthetics became the chips in a giant casino, one that created no economic growth even when it thrived, and then helped throttle the economy when the casino collapsed," Levin said Tuesday in his opening statement.
Wall Street issued more than $200 billion of these instruments between 2004 and 2007, according to Thomson Financial and synthetic CDO issuance rose to $89 billion in 2006 from $37 billion in 2004, according to the Securities Industry Financial Markets Association trade group.
As the debt trading machine was gearing up, so did Wall Street profits and bonuses. New York City securities industry employees raked in $217 billion between 2000 and 2009, the New York comptroller's office said this year -- with nearly a third of that coming in the bubble years of 2006 and 2007.
Over roughly the same period, the composition of Goldman, Wall Street's most successful firm, changed markedly.
In 1998, Goldman got more than two-thirds of its revenue from investment banking and asset management -- activities that help the economy by bringing capital and investors together. But by the first quarter of this year, revenue from trading and principal investment accounted for 80% of Goldman's total sales.
Goldman's not alone in that shift. JPMorgan Chase (JPM, Fortune 500), Citigroup (C, Fortune 500), Morgan Stanley (MS, Fortune 500) and Bank of America (BAC, Fortune 500) also have been making more money from trading.
So the Wall Street churn machine has done its damage. The question now is whether senators will stand up to the industry's financial muscle and pass reforms -- such as restrictions on bank holdings of derivatives -- that will serve to close the casino once and for all.
"There's no doubt their behavior was unethical," Sen. John McCain, R-Ariz., said of Goldman. "The American people will render a judgment as well as the courts."
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