During the 10-hour Senate hearing, Blankfein and the other company executives denied that Goldman had bet massively "short" on the housing market. Blankfein also said that Goldman had merely acted as a market maker carrying out its clients' wishes.
Michigan Democratic Sen. Carl Levin, the panel chairman, pilloried Blankfein for failing to own up to his firm's harm to clients that absorbed huge losses on subprime securities peddled by Goldman's sales crew, some of whom privately derided several of its deals as "junk," "shitty" and "crap" in internal e-mails.
Subcommittee members from both political parties were infuriated that Blankfein and Viniar refused to acknowledge that Goldman's net short bets against the housing market, peaking at $13.9 billion on June 25, 2007, amounted to a huge negative wager.
"The question is did you bet big-time in 2007 against the housing mortgage business? And you did," Levin told Blankfein.
"No, we did not," Blankfein shot back.
The problem might be in the question. Didn't Goldman decide to place its bets in 2006? And perhaps placed most of the big shorts before the end of the year? From the same article:
Goldman's decision to retreat from the cresting housing market came at a senior-level meeting Viniar organized on Dec. 14, 2006, after its mortgage traders reported losses for 10 straight days.
The day after the meeting, Goldman mortgage chief Dan Sparks instructed his team in an e-mail to reduce the company's inventory of billions of dollars in risky mortgage loans, to cash out losing bets that home prices would keep rising, to monitor the current value of its offshore mortgage securities more closely and to "be ready for the good opportunities that are coming."
Three days later, Fabrice Tourre, the mortgage trader who's now a defendant in the SEC suit, wrote that his unit had "a big short on."
As the traders escalated their bets against the housing market in the ensuing weeks, Goldman President Gary Cohn and other top executives paid close attention.
via www.truthout.org
Comments