I have seen Lloyd Blankfein on CSPAN stating unequivocally that Goldman Sachs did not see the the housing crisis coming.
In an internal e-mail released Saturday, Goldman Sachs chief executive Lloyd Blankfein wrote in November 2007 that the firm "didn’t dodge the mortgage mess," but "made more than we lost" by betting against the U.S. housing market.
Blankfein’s e-mail, which a Senate investigations panel released with three other subpoenaed company documents, appears to contradict Goldman’s denials that it profited from the subprime mortgage meltdown by secretly betting that housing prices would fall. At the same time, Goldman was selling tens of billions of dollars in risky mortgage securities.
Goldman has said that its contrary bets were largely on behalf of its clients.
The release of the documents sets the stage for a confrontation on Tuesday, when Blankfein and six other present and former Goldman executives are scheduled to testify to the Senate Permanent Subcommittee on Investigations, which will begin revealing the results of a yearlong investigation.
In a second e-mail, in July 2007, Goldman’s chief financial officer, David Viniar, updated company President Gary Cohn on the performance of residential mortgage securities.
"Tells you what might be happening to people who don’t have the big short," Viniar wrote, referring to Goldman’s negative — or "short" — bets on housing.
Goldman Sachs, the world’s most elite investment bank, was the only major Wall Street firm to escape much of the subprime crash that set off the global economic crisis.
Goldman reported $1.7 billion in mortgage-related losses, but the company has never divulged how much it earned from exotic contrary bets using insurance-like contracts known as credit-default swaps.
McClatchy reported last November that Goldman marketed $57 billion in risky mortgage securities, including $39 billion backed by risky home loans in 2006 and 2007 without telling investors it was secretly shorting the housing market.
Sen. Carl Levin, a Michigan Democrat who chairs the committee, said in a statement releasing the e-mails that Goldman Sachs and other investment banks were "self-interested promoters of risky and complicated financial schemes that helped trigger" the economic crisis ravishing the nation the past two years.
"They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients," Levin said. "These e-mails show that, in fact, Goldman made a lot of money by betting against the mortgage market."… [emphasis added]
Inserted from <McClatchy DC>
One of the reasons Goldman Sacks came out smelling like a rose is that most of their losses were paid when the Fed opted to but out AIG’s obligations at 100 cents on the dollar, even when Goldman was in the midst of negotiating the payment rate with AIG. This crime against US taxpayers was facilitated by Paulsen, Bernanke, and Geithner. Their claims of innocence are totally transparent. The practice of regulation of Banksters by Banksters must end.
4 Responses to “How Goldman Bet Against Their Investors”
Sorry, the comment form is closed at this time.
I read this yesterday – they were gloating in those emails about how much money they were making. The credit rating agencies are also being called to the mat. What they did is fraud, plain and simple.
I watched the credit rating execs on CSPAN. They seemed amazed that anyone would consider their behavior in any way questionable… as if they are entitled to rubber stamp crap.
the saddest part is that NONE of this will end – and any regulations will be so watered down – as to be meaningless, but will sure look pretty at a signing ceremony
DC, I wish I could disagree with you, but I can’t. The legislation will be a baby step in the right direction with just enough positive not to turn it down, but it won’t be the giant leap that we need.