Goldman Sachs e-mails show bank sought to profit from housing downturn

**Prince** · 04-24-2010, 10:29 AM

Goldman Sachs e-mails show bank sought to profit from housing downturn

By Zachary A. Goldfarb
Washington Post Staff Writer

A Senate investigation into the financial crisis has found that Goldman Sachs, the storied Wall Street investment bank, sought to profit from the historic decline in housing prices by betting against the U.S. mortgage market.

The documents show that Goldman, at times, made big, profitable bets against the housing market -- sometimes betting against mortgage investments that it had sold to investors.

Sen. Carl Levin (D-Mich.), chairman of the Permanent Subcommittee on Investigations, said four internal e-mails released Saturday contradict Goldman's assertion that it didn't seek to profit from the housing downturn. "Goldman made a lot of money by betting against the mortgage market," Levin said.

In a November 2007 e-mail, Goldman chief executive Lloyd Blankfein wrote that the firm "lost money" on the housing market, "then made more than we lost because of shorts."

The release of the documents comes as Goldman Sachs is preparing its most detailed defense yet to allegations that it misled clients in its mortgage securities business, arguing that the firm was unsure whether housing prices would rise or fall and did not take any action at odds with the interests of its clients.

An internal Goldman document, prepared for senior executives and obtained by The Washington Post, describes debates among top executives in 2006 and 2007 over whether the firm should make investment decisions based on the belief that the mortgage market would continue to prosper.

The document details meetings and e-mails that ultimately resulted in a decision to reduce the company's exposure to the mortgage market, especially subprime loans, by making new investments that would pay off if housing prices fell.

Goldman has been widely criticized for investing its own money to bet against the housing market while simultaneously urging clients to invest in securities that would increase in value only if the housing market did.

Those concerns over possible double-dealing spiked a week ago as the Securities and Exchange Commission filed a fraud suit against Goldman, alleging that it misled clients by selling them mortgage-related securities secretly designed to fail.

The Senate panel will hold a hearing on investment banks and the financial crisis Tuesday. Blankfein and other executives are scheduled to testify.
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In one of the e-mails obtained by the committee, Goldman chief financial officer David Viniar responded to a report that the firm earned $50 million in one day with bets that the housing market would decline.

"Tells you what might be happening to people who don't have the big short," Viniar wrote to his colleagues.

**bio-chem** · 04-24-2010, 02:11 PM

big deal. a company that wants to make money. I can accept that. they didn't hold a gun to someones head and force them to make a bad financial decision. if they had the foresight to bet against the housing market when it was obviously upside down it's too bad everyone else didn't realize it as well.

**DOMS** · 04-24-2010, 02:32 PM

Originally Posted by bio-chem

big deal. a company that wants to make money. I can accept that. they didn't hold a gun to someones head and force them to make a bad financial decision. if they had the foresight to bet against the housing market when it was obviously upside down it's too bad everyone else didn't realize it as well.

Holding a gun? Yes, they were.

The government forced the banks to give out sub-prime housing loans. The logic--if you can call it that--was that it was mostly minorities that needed those loans, and by not providing them, the business were being discriminatory.

The government played the race card to get the banks to give out the loans. Do you know what sort of trouble you can get into if your business is labeled "racist"? It was the government that was holding the gun.

And the Obama administration is still doing it.

**bio-chem** · 04-24-2010, 02:40 PM

Originally Posted by DOMS

Holding a gun? Yes, they were.

The government forced the banks to give out sub-prime housing loans. The logic--if you can call it that--was that it was mostly minorities that needed those loans, and by not providing them, the business were being discriminatory.

The government played the race card to get the banks to give out the loans. Do you know what sort of trouble you can get into if your business is labeled "racist"? It was the government that was holding the gun.

And the Obama administration is still doing it.

and these guys predicted the fall and acted accordingly to still turn a profit. if someone accepted a loan the couldn't afford (no matter the color skin) fuck them they loose their house and i get to buy it later at a reduced price.

**DOMS** · 04-24-2010, 02:43 PM

Originally Posted by bio-chem

and these guys predicted the fall and acted accordingly to still turn a profit. if someone accepted a loan the couldn't afford (no matter the color skin) fuck them they loose their house and i get to buy it later at a reduced price.

"You must spread some Reputation around before giving it to bio-chem again."

I'm not a fan of the mega-corps, but Goldman Sachs did the right thing. They profited the best they could in the situation that they were forced into.

**bio-chem** · 04-24-2010, 02:45 PM

Originally Posted by DOMS

"You must spread some Reputation around before giving it to bio-chem again."

I'm not a fan of the mega-corps, but Goldman Sachs did the right thing. They profited the best they could in the situation that they were forced into.

you said it so succinctly

**Dark Geared God** · 04-24-2010, 07:02 PM

lets face it i knew in 2003 that something like this was going to happen, anyone that in them market knew, bet(get insurance) against your hedge funds and when it falls flat the piss ants of the world get shafted and the rest make money. simple i make a killing on the kmart chapter 11 bought for cheap, sold for a ton...but they did what they need to do to make money but that JMO

**Dark Geared God** · 04-24-2010, 07:04 PM

Originally Posted by bio-chem

and these guys predicted the fall and acted accordingly to still turn a profit. if someone accepted a loan the couldn't afford (no matter the color skin) fuck them they loose their house and i get to buy it later at a reduced price.

anytime someone go's to a mortgage signing with zero down and walks away with a fist full of money somethings wrong with that....but how easy would it to be to walk away from the house if you had nothing invested..

**bio-chem** · 04-25-2010, 02:51 PM

Originally Posted by The Situation

anytime someone go's to a mortgage signing with zero down and walks away with a fist full of money somethings wrong with that....but how easy would it to be to walk away from the house if you had nothing invested..

exactly. sound fiscal policy has not been taught to Americans. and worse yet our government.

**danzik17** · 04-25-2010, 03:24 PM

The problem isn't that Goldman made money, it's that they were telling their clients that real estate was still a good investment while shorting the real estate market heavily at the same time.

At the least, that's extremely dishonest and unethical. At worst, it's fraud.

**DOMS** · 04-25-2010, 03:52 PM

Originally Posted by danzik17

The problem isn't that Goldman made money, it's that they were telling their clients that real estate was still a good investment while shorting the real estate market heavily at the same time.

At the least, that's extremely dishonest and unethical. At worst, it's fraud.

Was that really the issue? Do you have a link? Something more credible than "Goldman has been widely criticized for investing its own money to bet against the housing market while simultaneously urging clients to invest in securities that would increase in value only if the housing market did."

**danzik17** · 04-25-2010, 04:35 PM

Originally Posted by DOMS

Was that really the issue? Do you have a link? Something more credible than "Goldman has been widely criticized for investing its own money to bet against the housing market while simultaneously urging clients to invest in securities that would increase in value only if the housing market did."

Yes, that is the issue they're looking into.

If you want to read the released documents, Goldman Sachs and the Financial Crisis

The real story will be heard during hearings when I assume both employees and clients of Goldman will be questioned.

**Dark Geared God** · 04-25-2010, 05:32 PM

Originally Posted by bio-chem

exactly. sound fiscal policy has not been taught to Americans. and worse yet our government.

My parent taught me nothing is free, everyone now adays has there hand out

**LAM** · 05-07-2011, 05:19 PM

Originally Posted by danzik17

Yes, that is the issue they're looking into.

If you want to read the released documents, Goldman Sachs and the Financial Crisis

The real story will be heard during hearings when I assume both employees and clients of Goldman will be questioned.

Goldman also got bailout monies in Ireland. I was under the assumption that the bondholders assumed the risk since they make all the profits. thanks to the ECB the investors got their money and the losses were socialized losses onto the middle class in Ireland.

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