Goldman Sachs executives tried to fend off accusations they inflated the housing bubble, sold clients shi**y deals and made billions off the market's collapse, in a high stakes Senate hearing.

Facing tough questions from a panel of Senators, the current and former employees said Goldman was managing risk on individual positions rather than making a broad bet against the future of the housing market.

They spoke deliberately, but at times looked uncomfortable as they were asked to leaf through massive evidence binders, crammed with emails and other internal Goldman communications.

The executives insisted they took responsibility for their actions, but mostly blamed the housing crisis on broader industry issues, rather than their own conduct.

Former mortgage chief Dan Sparks came the closest to an apology, saying the bank made some poor decisions in hindsight. He added: I don't have any regrets about doing things that I think were improper, but we were participants in an industry that got loose.

Senator Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations, told Sparks and the other panelists, You should have plenty of regrets.

Goldman bond trader Fabrice Tourre said he did not hide material information from clients, in his first public appearance since the Securities and Exchange Commission accused him and Goldman of civil fraud for withholding details of a deal from investors.

Asked if Goldman has a duty to tell clients when it is betting against them, Tourre said the firm has a duty to buy and sell securities from clients, adding We do not have a duty to be investment advisors.

The hearing was continuing after nearly seven hours, with Goldman Chief Executive Lloyd Blankfein still scheduled to testify later on Tuesday.

Goldman has become a lightning rod for criticism for traders' behavior before and during the financial crisis that peaked in 2008, the worst economic decline since the Great Depression.

The subcommittee has held a series of hearings into the origins of the crisis, buttressing work on a bill to overhaul financial regulation.

The hearings recalled the Pecora Commission hearings that started in 1932 and investigated the causes of the 1929 stock market crash. Those hearings found unethical practices ranging from investors linking up to manipulate stock prices to selling stocks to friends of J.P. Morgan at discounted prices.

Goldman Sachs shares were up 0.7 percent at $153.04 by the close of trading on Tuesday, defying a drop of about 2 percent in the broader market triggered by downgrades in Greek and Portuguese debt.

IN THE EYE OF THE BEHOLDER

Senators routinely tried to pin the Goldman employees down on whether particular deals were evidence of ethical lapses.

In a tense exchange, Levin asked Sparks whether he felt obliged to tell clients when betting against their trades.

Levin pointed to a particular transaction that one of Sparks' bosses termed a shi**y deal in an email. The Senator used the phrase shitty deal at least a half dozen times at the hearing.

Sparks did not respond directly, and said it was not his own description of the transaction.

Chief Financial Officer David Viniar testified that the bank was mainly trying to reduce risk in late 2006 and 2007, rather than make a large bet on the direction of the housing market. The investment bank did not have a large short position, Viniar said.

Large is in the eye of the beholder. Billions seem large to a lot of folks who lost their homes, said Levin.

Early in the hearing, Senator John McCain said that he did not know if Goldman Sachs did anything illegal, but added there was no doubt that Goldman Sachs behaved unethically.

That issue may be important for clients, and raises problems for Goldman itself. The bank famously tells new bankers, sales staff, and traders that they should not do anything that would embarrass the firm if printed on the front page of a major business newspaper.

A 6 billion euro ($8 billion) Dutch transport pension fund said it had dropped Goldman as its fiduciary manager, but said the decision had no connection to the SEC charges.

The SEC's April 16 fraud suit centers on a subprime mortgage-linked product known as Abacus 2007-AC1. The agency says Goldman failed to disclose that hedge fund Paulson & Co had input into its construction and was betting it would fail.

Goldman's actions demonstrate that it often saw its clients not as valuable customers but as objects for profits, Levin said.

Edward Rogers, CEO of Tokyo-based hedge fund advisor Rogers Investment Advisors said if the SEC's suit is successful it could damage Goldman's prime brokerage business.

We think this situation is somewhat similar to the turn of last century when you had John D. Rockefeller and Standard Oil under attack by the U.S. government, said Rogers.

(Reporting by Steve Eder and Dan Margolies; Additional reporting by Jonathan Stempel and Dan Wilchins, editing by Tim Dobbyn)

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