E-Mails Show Goldman Boasting Amid Meltdown

Daniel Wagner and Stevenson Jacobs
Newsmax.com
24 April 2010

E-mails released Saturday morning show top executives at Goldman Sachs Group Inc. boasting about the money the firm was making as the national housing market collapsed in 2007.

The e-mails suggest Goldman benefited from its bets that securities backed by subprime mortgages would lose value. The messages seem to contradict previous statements by the investment bank that it lost money on the securities.

“Of course we didn’t dodge the mortgage mess,” CEO Lloyd Blankfein wrote in an e-mail dated Nov. 18, 2007, according to e-mails released by the Senate’s Permanent Subcommittee on Investigations. “We lost money, then made more than we lost because of shorts.”

Short positions are bets that the market will go down. As the housing bubble burst, Goldman and a few powerful hedge funds took short positions on the market. Many of those bets required other investors to bet the market would rise.

When the market went bust, people with short positions cleaned up.

“We were just smaller in the toxic products,” Goldman’s president, Gary Cohn, writes back to Blankfein that same Sunday evening.

Critics say their bets added fuel to the financial crisis.

One of those bets is at the heart of civil fraud charges the Securities and Exchange Commission filed against Goldman this month. The SEC says Goldman let hedge fund Paulson & Co. help select investments for a portfolio that was designed to lose value, then marketed the deal to investors who were betting the portfolio’s value would rise.

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