'Dear Chairman Frank and Ranking Member Bachus,

As you know, Goldman Sachs is scheduled to repay (Wednesday) the government's $10 billion preferred investment in our firm through TARP's Capital Purchase Program (CPP).

While different institutions had different capital and liquidity needs, we recognize the important effect the government's actions had on the financial system as a whole. Financial markets and institutions still have many issues to work through, but, without question, the TARP program has played an important role in helping to stabilize the financial system. As part of that system, Goldman Sachs is grateful for the government's extraordinary efforts and the taxpayers' patience.

Our obligations to the public, the financial system and our shareholders remain consistent and will not change even when we are no longer in the CPP. We take seriously our roles as a liquidity provider and allocator of capital and the effect they have on the efficient functioning of markets and, ultimately, on economic growth. Our return of the government's investment does not, in any way, end our obligations to the public interest.

We know that we have an explicit contract with our shareholders to be responsible stewards of their capital. While we regret that we participated in the market euphoria and failed to raise a responsible voice, we are proud of the way our firm managed the risk it assumed on behalf of our clients before and during the financial crisis. We believe that this is testament to our people and the culture of communication, client service and risk management they personify.

We believe that repayment of the government's investment is a strong sign of progress and one measure of the ability to recover from the financial crisis. But real stability can return only if our industry accepts that certain practices were unhealthy and not in the long-term interests of individual institutions and the financial system as a whole. As a firm, we commit ourselves to working constructively with regulators and policymakers to address systemic weaknesses and gaps that may have contributed to the financial crisis.

We have a responsibility to the capital markets to act as one of its guardians, helping to protect its integrity. We believe passionately in the work we do and consider it an important part of the process of growth and innovation which is at the heart of the capital markets.

Our obligation to our shareholders and the capital markets also means that we must ensure that compensation reflects the true performance of the firm and motivates proper behavior. That is why Goldman Sachs recently made public a set of principles concerning compensation practices. We will live by these comprehensive and specific standards and expect our shareholders to measure us against them.

The events of the last 18 months have marked a trying period. While financial markets may have improved, our broader economy continues to face challenging circumstances and many people around the world are suffering. In the short-term, it is always possible that markets may rebound while the economy still stagnates. But for Goldman Sachs, we know that in order for us to grow and play an active role disbursing capital throughout the system, we are dependent on sustainable and shared economic growth. We intend to do everything we can to play a constructive role toward this critical goal'.

Our Highly-Placed Professional's View

So Lloyd Blankfein apologises for Goldman's participation in the 'market euphoria' that caused the global financial crisis. But some are remarking that this 'apology' is somewhat hollow. Wasn't it the case that, during the lead-up to the financial crisis, Goldman continued to flog mortgage-backed deals to investors whilst its prop trading desk was reducing its exposure to these very same securities ? Wasn't one part of the firm still originating, distributing and promoting these mortgage-backed deals, when another part of the organisation had seen the warning signs and decided to get out ? Shouldn't there be an apology for this too ?

Blankfein talks about 'failing to raise a responsible voice', but I'd argue it's even worse than that, given Goldman's almost unparalleled market position and its knowledge of what was going on. It's easy to be wise after the event, but Goldman was wise during it. Shouldn't that voice have been shouting from the roof-tops ?'.

To be fair to Goldman, Jan Hatzius, the firm's chief economist, had been issuing very public warnings about the fragility of the US housing market long before the bubble burst, and the firm substantially reduced its marketing of mortgage-backed securities once it's prop desk decided to scale back its risk exposure to these instruments.

And the firm told Here Is The City:

'Recognising that problems in the housing market were beginning to surface in early 2007, Goldman Sachs took actions to hedge the mortgage securities it held on its balance sheet. This prudent risk management allowed Goldman Sachs to avoid the large write-downs some competitors suffered.

Goldman Sachs sold mortgage securities only to sophisticated institutional investors. The institutions buying and selling were well aware of the risk factors and perfectly capable of making informed judgements about them. Notwithstanding explicit risk disclosure associated with the marketing of these instruments, it is commonly understood that high returns equate to high risk'.

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