HARTFORD — A former top Goldman Sachs executive tapped to oversee economic development policy in Connecticut and lauded by Gov. Ned Lamont for his caliber of financial and investment experience finds himself answering a lot of questions about his role in the mortgage meltdown of 2007-08.
Since his nomination last month, David Lehman has spent hours talking publicly and privately to lawmakers about his time as co-head of the investment bank’s Structured Products Group Trading Desk and other positions at Goldman over the past 15 years, and whether he shares any responsibility for the revolving door of toxic mortgages that led to the crisis.
While a new governor’s cabinet appointments are typically given deference by lawmakers, Lamont’s fellow Democrats in the state Senate, where Lehman still awaits confirmation, have raised some of the loudest concerns about whether he is the best choice.
“He was there at that time and employed in the division that was involved in a lot of the decisions that proved to be so damaging for other investors,” said Martin Looney, the Democratic Senate president pro tem, of New Haven, who said legislative attorneys are poring over a roughly 550-page U.S. Senate investigation into the financial crisis, which led to a deep economic recession.
Lehman actually testified publicly in 2010 before the Financial Crisis Inquiry Commission, a congressional panel that spent more than a year reviewing the causes of the meltdown, about his role in a dispute between Goldman and AIG over how much the collateral the insurance giant needed.
Lehman has tried to assure state lawmakers, who ultimately decide whether he gets the state job, that he did nothing untoward while co-heading the mortgage trading unit.
“I did not know, at the time, that those securities were going to be worthless,” Lehman told lawmakers last month at his legislative confirmation hearing. “I understand with the benefit of hindsight, you know, the significant decline in security prices and home prices and the pain that that caused to the economy. But I did not know that at the time. And I’ve always conducted myself honestly transparently and acted in good faith in all my dealings at Goldman Sachs.”
Looney said that if “nothing dramatic” turns up, he is inclined to support the nomination of Lehman, someone Lamont sees as key to his economic development vision.
But Looney said he was “frankly, a little surprised” that Lamont, a former businessman who founded a cable TV company, nominated Lehman in the first place to run the state’s Department of Economic and Community Development and serve as the governor’s senior economic adviser.
“We expected him to obviously get someone from the private sector for that position, but I was a little surprised, also, in the fact it was someone who had come to the governor’s attention to so recently,” Looney said.
He was referring to how the 41-year-old Lehman expressed interest in playing a role in Lamont’s new administration through a mutual friend in January, just a few weeks before his nomination was announced.
Lamont said he believes Lehman brings valuable experience to state government, especially from his time overseeing Goldman’s public sector and infrastructure business. He said he’s “grateful that someone of his caliber with as much finance and investment experience as he has is willing to roll up his sleeves and join state government at this critical juncture.” Like Lamont, Lehman would not take a state salary.
Lehman has met privately so far with nearly all Democratic members of the Senate, who control the 36-member chamber.
At the request of newly elected Sen. Saud Anwar, D-South Windsor, Lehman answered questions for about two hours about his time at Goldman from about 15 concerned residents during a “very frank and important conversation” last week in the district. Anwar said he sought the meeting after receiving calls from constituents who were upset about the nomination.
Anwar acknowledged he had a “visceral reaction” when he first learned Lamont appointed the former Goldman Sachs executive, pledging initially not to vote for him.
“A lot of people’s lives have been shattered,” he said, referring to the financial crisis. “And when that had happened, many of these entities were bailed out and nobody paid the price, except the average American, for the wrong decisions and actions made by executives.”
But Anwar, who said he read through the U.S. Senate investigative report and met privately with Lehman, said he’s now willing to consider supporting the nominee.
“I had listened to one side of the story and that clearly made me uncomfortable and unhappy. ... I think there’s another side to the story,” said Anwar, adding how Lehman assured his constituents that he did not lie or misinform clients or colleagues while at Goldman.
Lamont has stood by Lehman throughout the controversy. His spokeswoman Maribel La Luz said the governor is “of course aware of Lehman’s background,” but noted his “strong work ethic” and background with the public sector and experience financing entities such as hospitals and universities.
“Because of that, among other reasons, the governor feels he’s the best person to help drive business development and economic growth and serve the people of Connecticut,” she said.