Washington - Goldman Sachs traders who helped the firm rack up billions of dollars in profits from secret bets against the housing market told a Senate investigating panel Tuesday that they'd done nothing wrong.

Among the four present and former traders was Fabrice Tourre, the 31-year-old Goldman vice president accused by the Securities and Exchange Commission on April 16 of fraudulently helping a Goldman client rig an offshore deal that cost two European banks $1 billion.

"I am saddened and humbled by what happened in the market," said Tourre, a Frenchman who took time off last week from his London-based job. "But I believe my actions were proper."

Dan Sparks, the former head of Goldman's mortgage department, told the panel that his team had no legal duty to tell investors that it was betting against its own products.

"Regret to me is something that you did wrong, and I don't have that," Sparks said. "That doesn't mean we didn't make mistakes … That doesn't mean we didn't do deals that didn't turn out the way we hoped they would … These deals performed horribly."

"You've got no regrets? You ought to have plenty of regrets," Michigan Democratic Sen. Carl Levin, the chairman of the Permanent Subcommittee on Investigations, told the four witnesses.

During what was shaping up to be a day-long hearing, Levin and other panel members confronted the witnesses with more than 170 subpoenaed e-mails and documents selected to show that the firm safely exited the subprime mortgage market before the housing crash and simultaneously made billions of dollars from negative or "short" bets.

The bets Goldman took out involved purchasing exotic instruments called credit-default swaps. They work like an insurance policy, with a buyer being compensated if the underlying deal goes sour.

Beginning in December 2006, Goldman began a strategy to reduce its subprime risks by selling off its dicey securities and secretly making exotic bets against the market and the products it was selling to its clients.

Levin, who cited the witnesses' recalcitrance in sworn testimony as another reason for regulatory reform, pointed to an Oct. 4, 2007, Goldman response to an SEC inquiry as evidence debunking the company's proclamations that it made major bets against the housing market. In it, Goldman's chief financial officer, David Viniar, said that through most of 2007 the firm "maintained a net short subprime position and therefore stood to benefit from declining prices in the mortgage market."

Former Goldman trader Joshua Birnbaum indicated in his 2007 personnel performance review that he could capitalize on the "fear" in the market of a coming mortgage market collapse to reap profits for the firm.

Because "the world would think" Goldman would continue to invest in the mortgage market for the long term, he wrote, the firm should "flip our risk" and bet on an impending crisis.

"We could use that fear to our advantage if we could flip our risk," wrote Birnbaum, who left Goldman in 2008.

Held before a packed, standing-room only Senate room, the hearing met was classic Washington theater, complete with protesters in prison uniforms demanding that Goldman executives do jail time and dozens of cameras trailing witnesses as they walked into the room.

When the four men took seats at the witness table — the first of seven current and former Goldman execs to testify, they quickly learned what it means to be in the middle of a full-blown tempest in the nation's capital. A crush of photographers encircled them, setting off a rat-a-tat of clicking cameras.

Missouri Democratic Sen. Claire McCaskill told them: "We're trying to home in on why so many people are unemployed in my state and why so many people lost money in their pension funds."

Goldman chief executive Lloyd Blankfein is scheduled to testify later today.

Much of the questioning echoed reports by McClatchy last November and December that Goldman had marketed $57 billion in risky mortgage securities in a series of deals in 2006 and 2007, including $39 billion backed by mortgages that it bought from lenders without telling investors that it was secretly making bets on a housing downturn.

Goldman also sold billions of dollars in offshore securities that included subprime mortgages. Securities experts told McClatchy at the time that the practice might have constituted fraud because investors might have opted not to buy the securities if they knew that Goldman was betting on their collapse.

The hearing was often contentious, with senators of both parties chastising witnesses for evading their questions or seeming to stall for time.

One of the testier exchanges thus far was between Sparks of Goldman and Levin. It surrounded one of the offshore deals Goldman peddled called "Timberwolf," which included securities backed by subprime mortgages that were most at risk if the housing market dropped.

Goldman documents show that the firm's sales force was told to make selling Timberwolf a priority. In 2007, Goldman sold about $300 million of Timberwolf securities to a hedge fund that collapsed later that year. A senior Goldman executive later described the deal as follows: "boy that timeberwof (sic) deal was one shitty deal." According to the subcommittee, 94 percent of the securities in the deal were from other offshore deals.

The hearing room then erupted in laughter — low titters at first, and then bigger laughs — as Levin repeatedly asked Sparks about the "shitty" deal and the e-mail.

Levin asked: Did you tell your clients that "this was a shitty deal?"

"Your top priority was to sell that shitty deal."

"Should Goldman be trying to sell a shitty deal?"

Levin later grilled Viniar about the e-mails or comments in which Goldman employees referred to specific deals as "crap" or "shitty" or "junk." What did he think about such disparaging comments — and how would clients feel about them? Levin asked.

"I think that's very unfortunate to have on an e-mail," he said. The hearing room erupted in laughter. Viniar realized his mistake and clarified that he meant it was unfortunate to have said in any format.

In his testimony, Birnbaum said there was a vigorous debate within Goldman about which way the housing market was headed. He said that nobody from senior management told him to make an overall "directional bet" against the subprime market, but simply to reduce risk overall.

He said he is "very proud" of his tenure at Goldman. "We provided significant liquidity to our customers in a difficult and challenging market while also managing to post a profit during this period," he said.

Comparing his panel's investigation to inquiries into the causes of the Great Depression, Levin said that what investigators see now is similar to what they saw in the 1930s. "The parallels are unmistakable to today's events," Levin said.

In his opening statement, Levin directly took on Goldman's contention — made repeatedly in recent weeks — that it did not profit at its clients', or the nation's, expense.

"The evidence also shows that repeated public statements by the firm and its executives provide an inaccurate portrayal of Goldman's actions during 2007, the critical year when the housing bubble burst and the financial crisis took hold," Levin said. "The firm's own documents show that while it was marketing risky mortgage-related securities, it was placing large bets against the U.S. mortgage market."

He later added that the actions Goldman took undermine the pretense that it was acting as a mere "market-maker" on Wall Street — or simply working to match buyers and sellers. "They represented major bets that the mortgage securities market — a market Goldman helped create — was in for a major decline," Levin said.

(Kevin G. Hall also contributed to this article.)

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