Preamble: Goldman Sachs has kindly taken time out of its busy schedule of shorting the collateralised credit future obligations markets to appear before the Senate permanent subcommittee on investigations today and answer one or two questions.

According to pre-released testimony, the head of Goldman Sachs, Lloyd Blankfein, will admit that his bank failed to raise the alarm about excesses in the mortgage industry and got involved in "overly complex" derivatives deals that fuelled perceptions of Wall Street running out of control. Blankfein will tell the committee that the Securities and Exchange Commission's $1bn (£647m) fraud case against his firm marks a low point in his career. "It was one of the worst days of my professional life, as I know it was for every person at our firm," Blankfein says.

But there could be lower points to come for Blankfein. According to today's New York Times, Goldman Sachs devised "a series of complex deals to profit from the collapse of the home mortgage market", which goes beyond the one deal that the SEC has picked out.

(For background have a look here and here on the SEC's case.) And my colleague Andrew Clark had a brief but exciting close encounter with Blankfein recently, which is well worth reading.

(I'll also be living tweeting events as they occur on Twitter: @RichardA - which will be much the same as this live-blog but shorter.)

9.50am: As we await Blankfein's arrival and the start of proceedings, a brief round-up of what to expect according to the US media.

According to the New York Times:

The legal storm buffeting Goldman Sachs continued to rage Tuesday just ahead of what is expected to be a contentious Senate hearing at which bank executives plan to defend their actions during the housing crisis.

Yves Smith of the naked capitalism blog has some analysis worth reading:

As Goldman and the Senate Committee on Investigations are duking out The Battle of the E-Mails, with each side claiming the other has painted a misleading picture, it is becoming pretty clear that Goldman, contrary to its sanctimonious twattle about putting clients first, actually puts its fees first.

Time magazine's blogger goes mildly insane:

Tell us Goldman CEO Lloyd Blankfein, were you:

a) lying to the American public

b) cheating the American public

c) stealing from the American public

d) all of the above

And the Wall Street Journal has a round-up of Goldmans jargon you might be hearing about in the email correspondence that the committee will examine. Such as: Lemonade: A structured-financial deal Goldman mixed up to make bad loans go down easy on investors. Used in a sentence, from a Goldman email: "They structured like mad and travelled the world, and worked their tails to make some lemonade from some big old lemons."

10.00am: For those of you following this in the US, it's on C-Span 3, and not as you might think, C-Span 2. Live streaming available for everyone, including outside the US, here.

10.04am: Carl Levin, the committee chair, is opening proceedings.

An amusing fisking of Blankfein's prepared testimony is here, from the Zero Hedge blog. The full text is here but without the nasty asides.

10.15am: Those of you not familiar with Carl Levin, he is one of the sharper brains in the Senate – and that's not a back-handed compliment, although it could be. He's a top inquisitor who has been doing this for a while and knows all the tricks.

Levin's open statement isn't pulling any punches: "The firm's own documents show it was placing large bets against the US mortgage market," says Levin. "The firm has denied making those bets, despite overwhelming evidence to the contrary."

The he gets to the nub of the SEC case against Goldman: that Goldmans' clients had a "reasonable expectation" that the bank would not sell products that it did not want to succeed. "Those were reasonable expectations," says Levin. But were they? That's the $1bn question.

Levin is now running through the greatest hits of the financial crisis and mortgage market meltdown and the likes of WAMU, New Century and other names that have come and gone.

10.20am: Levin is laying into Goldmans and its shorting of the housing market from 2006 onwards. His argument is that Goldmans was a vulture, swooping in to destroy a market it helped create in the first place, a "bait and switch" if you will:

Goldman says these bets were just a reasonable hedge. But internal documents show it was more than a reasonable hedge – it was what one top executive described as "the big short." Listen to a top Goldman mortgage trader, Michael Swenson, who touted his success in 2007, what he called his "proudest year" because of what he called "extraordinary profits" – $3bn as of September 2007 – that came from bets he recommended the firm take against the housing market. Mr Swenson told his superiors, "I was able to identify key market dislocations that led to tremendous profits."

10.30am: The full text of Senator Levin's opening "remarks" – if a few verbal punches in the face can be termed "remarks", that is – is now online here. But here's a choice "remark":

These facts end the pretense that Goldman's actions were part of its efforts to operate as a mere "market-maker," bringing buyers and sellers together. These short positions didn't represent customer service or necessary hedges against risks that Goldman incurred as it made a market for customers. They represented major bets that the mortgage securities market – a market Goldman helped create – was in for a major decline. Goldman continues to deny that it shorted the mortgage market for profit, despite the evidence. Why the denial? My best estimate is that it's because the firm, Goldmans, cannot successfully continue to portray itself as working on behalf of its clients if it was selling mortgage related products to those clients while it was betting its own money against those same products or the mortgage market as a whole.

Ouch. According to Levin, Goldman Sachs needs to maintain they are honest brokers in order to more efficiently fleece their clients. Or as Ralph Waldo Emerson put it: "The louder he talked of his honour, the faster we counted our spoons."

10.45am: Susan Collins, filling in for Tom Coburn as the ranking Republican member, is next. Here's the shorter version: Lots of bad things happened and it all got a bit crazy but financial innovation is important. But you know, ethics.

Now the rest of the committee gets to make a few sound bites. Democratic Senator Claire McCaskill gets into the complexity of the investments that Goldmans traded in, with particular ire for synthetic CDOs: "It's the la-la land of ledger entries." She's on top form: "It's called synthetic because there's nothing there but the bet."

More McCaskill: "What you worried about most was a bad article in the Wall Street Journal, not a regulator." And: "You think you're so smart. Let me tell you, any street gambler would never lay a bet with the house that has the record that this investigation reveals."

10.50am: Now the Goldman Sachs witnesses are sworn in. Daniel Sparks, the former head of Goldman Sachs' mortgage department, kicks off with his statement, and tells us what a great bunch of highly ethical people work at Goldmans.

Josh Birnbaum, a former managing director in the the mortgage department at Goldman Sachs, is next. He also says that GS is chock full of ethical people who breathe integrity. His full testimony is here. He says:

No one from senior management told me to make a directional bet against the subprime market. Rather, during the 2006-2007 period, regardless of whether our books were long or short, the consistent theme from management was to get smaller, reduce risk, and get closer to home.

11.00am: An hour in and the excitement is almost too much to cope with. (Irony.)

Luckily, to make things really exciting, here's a big fish: Michael Swenson, the managing director of the mortgage department at Goldman Sachs. And he instantly provides a clear and easy to understand summary of his role:

I was primarily responsible for the Asset-Backed Securities (ABS) trading desk, which was responsible for making markets in ABS securities and derivatives for our customer franchise. The ABS desk traded consumer ABS, sub-prime cash, single-name ABS credit default swaps (which I will refer to as "single names") and the ABX indices, which are a family of synthetic indices that reference a standard basket of 20 subprime deals.

That's cleared that up.

11.10am: And now it's the man we've all been waiting for: the London-based Goldman Sachs banker Fabrice Tourre, aka "Fabulous Fab" as he referred to himself, whose emails and role are at the centre of the SEC's case against Goldmans:

"The whole building is about to collapse anytime now," Tourre, an executive director at Goldman Sachs in London, wrote to a friend in a January 2007 e-mail, according to the SEC's complaint. "Only potential survivor, the fabulous Fab… standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!"

Fabulous Fab lays out his defence before the committee:

The last week has been challenging for me and my family, as I have been the target of unfounded attacks on my character and motives.... I wish to repeat – I did not mislead IKB or ACA, two of the most sophisticated institutional investors in these products anywhere in the world.

11.12am: Fabulous Fab is disappointingly normal in real life, as opposed to his obnoxious email persona. "Tourre actually doesn't look/sound as douchey etc as I expected," tweets an observer. Oh well, it's early days.

My colleague Andy Clark reports that top Wall Street blogger Bess Levin at Dealbreaker opines that the Fab has "grown his hair a little longer and is looking kind of hot".

11.16am: Now Levin is reading out some naughty internal emails about selling securities to clients on the one hand while shorting them to death elsewhere in the market.

Levin asks Sparks: "The buyer ... is asking a direct question, how do you guys get comfortable with the source of these securities? Did you not have a responsibility to answer a direct question?"

Sparks looks perplexed (and, frankly, I'm with him there). Levin repeats himself several times, the gist of which is: should have the bank told a client that asked a direct question about Goldmans view ("comfort") of a particular security – one that in fact Goldmans was shorting at the same time as selling.

"I think you understand it, I think you don't want to answer it," says Levin. "I'm just going to go on because you're not going to answer the question, that's obvious."

Sparks does a good impression of a fish trying to breathe air.

11.35am: This is fantastic stuff. Now we're in to the toxic garbage of the sub-prime market that Goldman Sachs happily sold and shorted from time to time. Levin's now onto something called "crap pools" involving Fremont sub-prime mortgages, which Goldmans sold to the tune of $700m, and asks Sparks if he recalls the deal. Umm, says Sparks.

The Timberwolf CDO is next up. "I remember in the longs we took we lost hundreds of millions of dollars," says Sparks. "I'm talking about the shorts," snorts Levin, who is having fun here. His tactic is to give the witness about 0.05 of a second to answer his questions.

Levin is now reading out internal Goldmans emails: "Boy, that Timberwolf was one shitty deal," reads one. "How much of that shitty deal did you sell to your clients?" wonders Levin.

"You knew it was a shitty deal and you didn't tell your clients," Levin tells Sparks. "Does that bother you at all?" Sparks goes down the Reagan route in his defence: "I don't recall," he says.

Oh wow, this is delicious. I wish I could keep up with Levin here, who is greatly enjoying repeating the phrase "shitty deal".

Daniel Sparks is currently wishing he'd done medicine like his parents wanted him to. But oh no, he had to be clever and go work on Wall Street.

11.40am: Susan Collins takes over grilling Sparks, and gets the same stonewalling that Levin got: "I'm beginning to share the chairman's frustrations and I'm only into 30 seconds of my time," says Collins sharply. Her question is: "Do you have a duty to act in the best interests of your clients?"

Sparks gulps and rolls eyes. "I believe we have a duty to serve our clients well," Sparks replies, which draws a sharp intake of breath in the room, for good reason.

Bam. Sparks won't agree that Goldmans Sachs should act in the best interests of its clients. That's a killer.

Tourre gives a similar weasel response – about offering liquidity – and Collins slaps him around. Birnbaum is the only one who says yes, it does.

11.45am: Yikes. Susan Collins accuses the Goldmans witnesses of trying to "burn through" the committee's time, after Tourre asked her to repeat a long question.

She gets back on track, grilling Un-Fabulous Fab over an email of his: "This sounds like a deliberate strategy to sell products to less sophisticated clients ... so you could make more money," asks Collins.

Tourre repeats the "highly sophisticated institutions" line about buyers in his defence. "Well Mr Tourre that's not how it reads to me," retorts Collins, who's doing a good job here.

11.55am: Chairman Carl Levin rather ominously says: "We'll be here as long as it takes," in case the Goldman Sachs witnesses want to run out the clock. The Goldmans people should take that seriously, as a promise not a threat. This is the US Senate. They love talking on TV.

12.00pm: Ted Kaufman, who is Joe Biden's fill-in senator, actually seems to know what he is talking about, perhaps because being from Delaware, a tiny state full of banks, helps.

Kaufman is honing in on "stated income loans" – the worst of the worst mortgages handed out during the bubble with slightly higher interest rates without checking on the borrowers "stated income," i.e. any number the borrower felt like writing down on a form.

Sparks rather foolishly appears to claim that Goldmans didn't know what a problem these dodgy stated income loans were, and Kaufman is ... well, making fun of him is the polite way of putting it, so Sparks quickly changes his tune.

Sparks is awful. If Goldmans had the choice, a big umbrella handle would appear off stage and yank him out of there, and run down the curtain.

12.08pm: "Don't do the hindsight thing with me," Kaufman says, more in sorrow than in anger, as Sparks makes another pathetic attempt to defend himself.

The Big Short by Michael Lewis gets another mention. Let's all buy a copy.

12.15pm: "Have you ever heard of barbelling?" asks Senator Kaufman. And guess what? They haven't, except from reading Michael Lewis's book.

In fact it seems that many staff at Goldman Sachs only found out about all this sub-prime CDO-whatever business from reading The Big Short. I can just imagine the scene in the staff cafeteria: "Hey Daniel, have you read this stuff? Wow!"

Someone should buy these guys a copy of Liar's Poker - that will really blow their minds. On second thoughts, maybe not.

(Barbelling is not a pick-up line in a sleazy bar. In fact it is packaging securities by lumping together some good stuff with rubbish so that the package seems ok on average. There's a statistics joke that sums this up: A man with his head in a freezer and feet in an oven is, on average, at room temperature.)

12.33pm: Tom Coburn arrives, the ranking Senate Republican, and instantly sinks his fangs into Goldman Sachs. No he doesn't! He gives them a big hug, in a manly fashion of course.

Well, that was a complete waste of time.

In unrelated news: Wall Street donations to the Re-Elect Tom Coburn Committee flood in.

12.45pm: Claire McCaskill next up. "Who chose ACA?", she asks, getting to the meat of the issue at hand with the SEC's case against Goldman Sachs. Ah, Goldmans and Paulson, says Tourre.

"Now this is what a lot of people don't get, this is where it gets weird" says McCaskill. "Why wouldn't you just tell [other clients] that we're doing this because Paulson wants to go short?"

Tourre's answer has three parts, the third of which is that Goldman might want to keep the position for itself. In other words, that Goldman might want to short this crap to death if they thought there was money it in.

Tourre falls back on the standard Goldman defence: ACA selected the portfolio. "You put ACA in there as some sort of fig leaf," retorts McCaskill.

1.00pm: Three hours in. And now we are back to Timberwolf - the "shitty deal" that we have already come to know and love. Senator McCaskill proceeds to dance on its grave.

There's some confusion about particular emails going astray. "Don't worry, I've got plenty more," says McCaskill. As an aside: McCaskill has a nonchalant manner of saying "shitty".

Watching people in a room leafing through bits of paper not exactly the most riveting TV in history since Frost-Nixon interview or Nick Clegg's last debate.

"Were you approached by Graywolf?" asks McCaskill, sounding like she's reading lines from an upcoming X-Men movie staring Hugh Jackman's father.

Otherwise, this is getting repetitive. Who's next? Mark Pryor, Democratic senator from Arkansas, who pokes Sparks again over the bank's responsibility to inform its clients about the bank's trading activities. But compared with Levin's bite, this is like being savaged by a dead sheep. In this case, a not very bright dead sheep.

1.15pm: Republican Senator John Ensign is next in the batter's box. He's a senator from Nevada, the home state of Las Vegas, and he thinks that comparing Wall Street to Vegas insults Vegas. "In Vegas, you know the odds. On Wall Street, they manipulate the odds while you're playing," says Ensign – who knows something about this subject, since his stepfather ran a swanky casino, Mandalay Bay:

Las Vegas is full of casinos, but none quite like the one at Mandalay Bay. Our 135,000 square-foot gaming environment was designed to make waves along the Strip. You'll play in a tropical setting of flowing water, lush foliage, and exotic architecture. And whether you prefer slots or tables, blackjack or poker, you'll find a full selection of your favorite games.

1.30pm: Ensign wonders if Goldman Sachs's pay structure and bonuses lead to ethical behaviour?

"I believe that at Goldman Sachs, in the past, I had every reason to be ethical," says Sparks. Birnbaum agrees, and goes further: "If you weren't cognisant of ethics you would not get paid and you would probably get fired." Mmm.

1.45pm: Jon Tester, a Republican from Arizona, asks a pretty straight forward question of Birnbaum: how and when did he become convinced that the housing market bubble was in decline? And can't get a straight answer.

Birnbaum gets sniffy about the difference between house prices and sub-prime mortgage defaults. "I'm not trying to set you up or anything," asks Tester, getting, well, testy, and presses on as to when Birnbaum thought the housing-parrot was dead and whether he discussed this with his colleagues.

"I did socialise my thoughts with some people," says Birnbaum, who really comes across as a barrel of laughs, socialising his thoughts. Can we run a Turing test on Birnbaum? I'm not sure he'd pass as human, based on today's performance. I was suspicious earlier when he described the committee members as "earthlings".

And for the 900th time during this meeting, Tester asks what a synthetic CDO is. "You can say what you want but it is gambling," says Tester, wanting to know why they exist in the first place.

1.55pm: We're back to the question of Goldman Sach's responsibility to its clients, as opposed to its market-making and own dealing-making. Sparks: "If you don't prudently manage your risk, you won't be around to deal with your clients."

Oh dear, Senator Tester asks Sparks what he'd do in terms of reforming financial services regulations. Again, Sparks won't answer. "It's a very hard question," he cautiously ventures. Well stop the presses.

2.10pm: Four hours and still going. But here's Chairman Levin again. "Let's look at the junk you were selling," he says with relish. How long before he says "shitty deal" again? Somewhere on Wall Street someone is taking bets on that very question.

Now Levin is unpicking a series of deals. "If you can sell your junk and shift the risk on that, then Goldman puts $2bn in its pocket," says Levin.

Sparks interrupts, asking which exhibit was being discussed. Levin is visibly annoyed at the delay. "Maybe we'll get an answer this time," he snorts.

Levin's game is point out where Goldman was selling securities to clients at the same time as it was buying synthetic CDOs to hedge its exposure. The Goldman people look confused, because we have two alien races involved in mutual incomprehension here. They see this as normal activity, but Levin is trying to expose that Goldman is playing both sides of the game – telling its clients that it's an investor while at the same time getting the hell out of Dodge.

"They made some lemonade from some big old Goldman Sachs lemons. Have you got regrets? You ought to have plenty of regrets," growls Levin.

Let me predict right now that many Goldman Sachs executives will never donate money to the Democratic party for the rest of their lifetime.

2.14pm: Levin exhibits great comic timing. "This is Goldman Sachs's statement to the SEC. [Pause] I'm not sure you want to quibble with this one."

But of course they do quibble, in that they will only speak to their own parts of the business. Later, to Birnbaum: "I'm just asking you if you think the darn statement is true."

Somewhere on Wall Street, darts are being thrown at pictures of Carl Levin.

2.25pm: Now even Tom Coburn is getting tough-ish with Goldmans, possibly as a result of the evasive responses by the Goldman Sachs witnesses.

There's only one way to get through a Senate hearing: you have to remember that senators believe they have the wisdom of Solon and the divine powers of Byzantine emperors. The best tactic is throw yourself on their mercy. The mistake being made by the Goldman Sachs staff here is that they think they are in an episode of Law And Order. They're not. They're in an episode of Rome, subject to the whims of a brutal tyrant.

2.36pm: Oh dear, Tourre is not dealing well with Levin asking him questions that are matters of public record, and then attempting to respond in financial jargon.

Levin now reading out more incriminating internal emails about Goldman's relations with its clients.

(Obscure side-note: Tourre reminds me of PY Gerbeau, the man who ended up running the Millennium Dome. But maybe that's because they are both French.)

3.00pm: Well the computer just swallowed a chuck of text of Levin roasting Tourre over an open fire, and I'm losing the will to live. After five hours of back and forth, but mainly forth, since the Goldman witnesses aren't giving much away, there's a lot to pick over – I'll be back to wrap up later. In the meantime, the New York Times is doing a far better, grown-up job with the live-blogging here.

For your viewing pleasure here's a highlights reel of Carl Levin's "Shitty Deal" remix. It's a scream.

3.16pm: Woo hoo! A break in proceedings for the time being.

9.00pm: So that was Goldman chief executive Lloyd Blankfein's testimony, which lacked something of the fireworks earlier in the day, possibly because after 10 hours of this, everyone was starting to melt.

My excellent colleague Andrew Clark does the hard work on the appearances by Blankfein and chief financial officer David Viniar:

The seven past and present Goldman executives appearing in Congress were greeted by protestors in prison uniform, bearing placards reading Stop looting America! and Shame. Goldman's chief executive, Lloyd Blankfein, at times struggled with the tone of hostility, assuring lawmakers that he had no better foresight of the US economy than others in the market: "I don't think we're that smart."

You know Blankfein doesn't really believe that.

Conclusion: Goldman Sachs aren't the first group of people to find themselves caught like rabbits in headlights before a hostile Congressional committee. They have learned the hard way about the level of hostility that exists towards them and to Wall Street, a hostility not at all tempered by the fact of an economic train wreck and it being an election year. And they have learned the iron rule of Capitol Hill: the most dangerous place in Washington DC is between a US senator and a TV camera.

Despite all that, Goldman Sachs came with nothing. In its mind the bank has done nothing wrong, nothing whatsoever. In fact it believes quite the reverse: that its actions are beyond reproach, barring a few choice emails that they'd rather hadn't been made public, and that GS is merely an honest market-maker. Reading the tweets of disbelief from Wall Street and its allies, that lambasted the senators for not understanding how things are done, or how the market works, reinforces that view.

The thing is, the senators don't understand how a modern investment bank works – or rather, now they've found out, they are shocked. That a reputable bank can play both sides of the market, like the mob telling one of its boxers to take a fall, selling investments at the same time as selling those clients and investments short, is what has shocked them. It doesn't shock Goldman Sachs or Wall Street because that's the way it has evolved, and if those silly old senators haven't caught up, that's their problem. To the senators though, that's betting against their own clients. According to Goldman, that's "reducing risk".

What else: an interesting piece in the Columbia Journalism Review about the Greywolf "shitty deal" that Senator Levin was so interested in. Shitty sounds about right. And here's far more detail than 99.99% of the world will ever need to know on the subject of Greywolf.

Here's Simon "Baseline Scenario" Johnson's summary of the day's outcome:

At this stage in the proceedings, the Goldman Sachs' public relations people must be feeling more than a little down. The firm's lawyers are still breathing fire, Lloyd Blankfein trod the fine line between not being apologetic and actually saying "it's capitalism, stupid", and the more junior executives interrogated today did not say anything blatantly incriminating. But the public image of the firm around the world – including with finance ministers and pension funds – has taken a severe beating

The last word should go to Carl Levin, from his grilling of Blankfein: "They're buying something from you – and you are betting against it. And you want people to trust you. I wouldn't trust you."