Showdown Test of Wall Street Reform; The Evidence Against Goldman Sachs
WOLF BLITZER, HOST: Rick, thanks. Happening now, a showdown test of Wall Street reform. Will Republican opposition crack under the weight of the case against Goldman Sachs? This hour, the Senate vote -- more revealing e-mails just released by lawmakers, as well. Also, growing suspicion that it was North Korea that torpedoed a South Korean warship -- we'll tell you what a U.S. military official is saying right now and whether there's new reason to worry about war. And a wide stretch of U.S. coastland is in danger right now. We're watching the race to plug up and clean up thousands of gallons of oil oozing from that sunken rig off Louisiana. I'm Wolf Blitzer. You're in THE SITUATION ROOM. We're standing by for a crucial vote in the U.S. Senate right now -- a vote that will help decide whether Wall Street will have to play by new rules. Democrats are hoping public anger about the economy, the financial bailout and the fraud allegations against Goldman Sachs will push the debate forward. But they need some Republican support to do that. They probably won't get it, at least not this hour.</s>SEN. HARRY REID (D-NV), MAJORITY LEADER: In short, Democrats stand for bring more accountability and transparency to Wall Street. As far as I can tell, the only thing Republicans stand for is standing together.</s>SEN. MITCH MCCONNELL (R-KY), MINORITY LEADER: If we can't look our constituents in the eyes and tell them with absolute certainty that we've addressed their core concerns, then tell me, why are we voting on this bill? The Democrats want us to trust them on this one. With all respect, Americans aren't in a trusting mood.</s>BLITZER: The roll call is now underway. Let's go up to Capitol Hill. Our Congressional correspondent, Dana Bash, is watching all of this unfold. This vote right now, it looks like a -- a done deal, that they're not going to have the Democrats need. Is that true -- Dana?</s>DANA BASH, CNN SENIOR CONGRESSIONAL CORRESPONDENT: Well, I talked to a Republican source just before coming on air who says that they do feel confident that all 41 Republicans will vote no, meaning that they -- the Democrats will not get to vote -- to move ahead with this debate. And that is not unexpected. And, in fact, what we are seeing here is, in many ways, political theater on a very real very resonant issue, which, of course, is Wall Street reform. And, Wolf, talking to Democrats, they say that they are moving forward with this, even though they know it's going to fail, because, in fact, they believe that that is actually a political up side, to have as headlines tomorrow morning that Republicans are blocking Wall Street reform. They say that that is not a bad thing at all politically. So you might wonder why Republicans would be walking into what seems like a political trap. Well, Wolf, Republican sources say that they believe they have a good argument, too. And that is they're not voting no in general, but they are just voting no against what they call a partisan Democratic bill and they actually do want bipartisan reform and they're working toward a bipartisan deal. And, in fact, what you're seeing on the floor is what's going on in public -- as I said, in many ways, theater. But behind-the-scenes, there are bipartisan talks going on. In fact, the chairman of the Banking Committee, Chris Dodd, who was the lead negotiator on this, met earlier today with Republican Richard Shelby on this issue. They are going to continue to meet. I just bumped into Richard Shelby. He said that they're going to have a meeting right after this vote is done and they're going to keep negotiating. There are lots of issues that separate them, but they say they are continuing to make progress. But that is going on as this vote plays out, that, again, we could be surprised, but everybody believes it will fail, at least to start debate right now.</s>BLITZER: Because the Democrats were hoping Olympia Snowe or Chuck Grassley or at least one Republican would join them and get the 60 votes they need. Does it look like all 59 Democrats -- the 57 Democrats, the two Independents who caucus with the Democrats -- will they vote en mass as one?</s>BASH: I also checked in with senior Democratic sources. And they say they believe that they have all of their votes in line, even Independent Joe Lieberman. I spoke to his office. And they -- he said that he was planning on voting yes for this. So if everybody shows up, we are probably -- we are going to see a straight party line vote, if all of these forces are correct and -- and their head counting and whip counting is correct going into this vote -- Wolf.</s>BLITZER: All right. We're going to watch this. We expect several more minutes for them to vote. We'll have the results as soon as it's official. Dana, don't go too far away. In midst of this political tug of war over financial reform, top executives of Goldman Sachs face off with senators here in Washington tomorrow. They expect to be grilled about the fraud allegations against Goldman Sachs and about a bunch of internal e-mails just released ahead of this hearing. Some more of those e-mails are being made public this hour. And Lisa Sylvester has been going over the documents -- Lisa, what are we learning?</s>SYLVESTER: Oh, this is fascinating stuff, Wolf. The Senate Subcommittee on Investigations just released new Goldman Sachs internal e-mails and that will be highlighted during tomorrow's hearing. The Committee's chairman, Senator Karl Levin, says that as the mortgage market was tanking, as people's home were being foreclosed on, Goldman made billions by betting against the housing market or, in other words, shorting the housing market. And at the same time, Levin says, Goldman was still selling to its clients these mortgage products that it didn't even believe in and was betting would fail. Here's a sample of some of those e-mails Goldman's wrote in an e- mail: "Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts." Another exhibit. This is a performance review of Goldman employee, Michael Swenson. Quote: "It should not be a surprise to anyone that the 2007 year is the one that I'm most proud of to date -- extraordinary profits, nearly $3 billion to date." Now, Senator Karl Levin said that all of this slicing and dicing and selling toxic mortgages played a role in blowing up the financial markets, costing people their homes and jobs.</s>SEN. CARL LEVIN (D-MI), CHAIRMAN, PERMANENT SUBCOMMITTEE ON INVESTIGATIONS: The evidence shows that Goldman repeatedly put its own interests and profits ahead of the interests of its clients. For large fees, Goldman helped run the conveyor belt that dumped hundreds of billions of dollars of toxic mortgages into the financial system.</s>BLITZER: Lisa, what is Goldman Sachs saying about all of this?</s>SYLVESTER: Well, Goldman clearly is -- they are denying the charges that Levin has put forward. And Goldman is actually saying that they had a net loss of $1.2 billion in residential mortgage products at the time. They say the committee, what it's done is essentially cherry picked the e-mails, adding, quote: "It is concerning that the subcommittee seems to have reached its conclusion even before holding a hearing."</s>BLITZER: We -- we've heard a lot about one particular Goldman Sachs employee who's actually been charged charge by the SEC with fraud. Tell us about him.</s>SYLVESTER: His name is Fabrice Tourre. And Goldman Sachs, they're clearly distancing themselves from him. They released e-mails from 2007. It's between Tourre and his girlfriend. And I got a hold of those e-mails. And I've got to tell you, it doesn't paint a favorable picture. Tourre, at the time -- I'll paint the picture for you -- was a 28-year-old trader. He was selling a portfolio of mortgage investments called Abacus to investors. And he writes in one: "The entire system is about to crumble at any moment. The only potential survivor, the Fabulous Fab." This was one of those e-mails in which he's referring to himself as the Fabulous Fab. On the U.S. subprime market he wrote, quote: "According to Sparks (ph), that business is totally dead and the poor little subprime borrowers will not last so long." Another e-mail to his girlfriend: "Just made it to the country of your favorite clients, Belgians. I've managed to see a few Abacus bought -- to sell, rather, a few Abacus funds to widows and orphans that I ran into at the airport." And, Wolf, we'll expect to see more of these details, more of these e-mails and internal documents tomorrow. So that hearing should be fascinating to watch.</s>BLITZER: Twenty-eight years old at the time. Fabrice -- and he called himself the...</s>SYLVESTER: Fab...</s>BLITZER: The Fabulous Fab.</s>SYLVESTER: The Fabulous Fab. Exactly. He's now only 31 and he's going to be grilled tomorrow. I mean you can expect...</s>BLITZER: He'll be there, as well?</s>SYLVESTER: Yes, he will be testifying.</s>BLITZER: Including Lloyd Blankfein, the chairman and</s>CEO. SYLVESTER: Exactly.</s>BLITZER: All right. We'll be having extensive coverage of that tomorrow. Lisa, thanks very much. Anger in Arizona over the state's very new tough immigration law setting off alarm bells here in Washington. Is federal immigration reform a winning issue for Democrats in this election year or is it already backfiring? And the U.S. Supreme Court may have a say in the kind of video games your kids are allowed to play. Finally, did North Korea sink a South Korean warship? There's new information coming in right now. If it did, will the Obama administration do anything about it?