A world in economic crisis

Lose some – but win more with shorts

Posted in dodgy swaps and derivatives, Goldman Sachs by Aussie on April 25, 2010

The Goldman Sachs subprime mortgage scandal is getting bigger and bigger as more information is provided regarding the activities of the group. The ABC online reports:

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 emails released by a Senate panel on Saturday.

“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 email dating from November 2007.

“Sounds like we will make some serious money,” said Goldman Sachs executive Donald Mullen in a separate series of emails from October 2007 about the performance of deteriorating second-lien positions in a collateralized 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.”

It is unquestionable that the executives at Goldman Sachs knew exactly what they were doing and that they intended to make money out of the subprime market, even though it was becoming toxic. It is really disgusting that Goldman Sachs has benefited so much out of TARP funds.

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