Executives from Goldman Sachs faced intense questioning before a Senate subcommittee over the investment bank’s sales of securities that an employee described as “sh***y.”

“Boy, that timberwolf was one “sh***y deal,” Thomas Sachs, a former head of sales aand trading at Goldman wrote in an e-mail quoted by Senate Permanent Subcommittee on Investigations Chairman Carl Levin, D-Mich., in a hearing Tuesday.

The sales of synthetic collateralized debt obligations brought fraud charges by the Securities and Exchange Commission against the bank and vice president Fabrice Tourre earlier this month (see Goldman’s Midas Touch of Fraud).

“I deny categorically the SEC’s allegation,” said Tourre, who was accused of setting up packages of money-losing mortgage-backed securities at the behest of an outside firm, Paulson & Co., which wanted to bet against a sinking housing market. “And I will defend myself in court against this claim.”

Goldman CEO Lloyd Blankfein defended his firm’s business as a market maker. “Every futures contract on oil or anything, you can characterize it as a bet,” he said. “They provide liquidity for people to hedge against some future position.”

He also defended the role of another outside firm, ACA, in approving the package of securities at the heart of the SEC case. “The biggest buyer of that transaction was very well represented,” he said. “It was the selection agent itself.”

Sen. Claire McCaskill, D-Mo., said Goldman’s behavior “sounds like hamsters trying to get compensation.”

Blankfein was asked by Sen. Mark Pryor, D-Ark., why his firm uses off-balance-sheet transactions. “I’m not sure we ever do,” said Blankfein. “As a matter of policy we mark to market all obligations of the firm, whether they’re on balance sheet or off balance sheet.”

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