Goldman Sach e-mails released
Goldman Sachs officials discussed making "serious money" in 2007 off the subprime crisis as mortgages were starting to falter in rapid numbers, according to a collection of e-mails released by a US Senate panel yesterday.
"Of course we didn't dodge the mortgage mess. We lost money, then made more than we lost because of shorts," Goldman Sachs chief executive Lloyd Blankfein said in an e-mail dating from November 2007.
"Sounds like we will make some serious money," said Goldman Sachs executive Donald Mullen in a separate series of e-mails from October 2007 about the performance of deteriorating second-lien positions in a collateralised debt obligation, or CDO.
The Senate Permanent Subcommittee on Investigations is holding a hearing on Tuesday with Mr Blankfein and other Goldman executives, scheduled to testify about the role Goldman Sachs played in the financial crisis.
The firm has been sued for civil fraud by the Securities and Exchange Commission over its marketing of a CDO.
Commenting on the emails, Senator Carl Levin, chairman of the subcommittee, said that they showed Goldman "made a lot of money by betting against the mortgage market." "Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis," Mr Levin said in a statement.
A representative of Goldman could not immediately be reached for comment.
Goldman plans to argue at Tuesday's hearing that it was unsure where housing prices were headed and did not act against its clients' interests, according to an internal document.
The investment bank did acknowledge shorting mortgage-related products at times, but says its decisions were prompted "not by any collective view of what would happen next, but rather by fear of the unknown."