It is believed that Goldman Sachs & Co. tried to profit from the drop
in the U.S. housing market. A Senate investigation was conducted into
the financial crisis and what was discovered reflects poorly on Goldman.
According to Sen. Carl Levin, D-Mich., chairman of the Permanent Subcommittee
on Investigations, four internal emails that were just released go against
Goldman’s claim that it didn’t try to profit from the burst
of the housing bubble. Levin told The Washington Post, “Goldman
made a lot of money by betting against the mortgage market.”
One internal Goldman document, which was created for senior executives,
provides details about meetings and correspondence that eventually led
to the decision to lower the investment bank’s exposure to the U.S.
mortgage market. Allegedly, the plan was to put together new investments
that would profit from a housing downturn.
An email that was acquired by the Senate committee showed that the investment
bank made $50 million in just one day, because of its bets that the housing
market would drop. This email contained Goldman’s chief financial
officer, David Viniar’s response to these earnings. “Tells
you what might be happening to people who don’t have the big short,”
Another email from October 2007 was just as disturbing. Goldman mortgage
trader Michael Swenson, responded to the news that credit-rating companies
downgraded mortgage-related investments by writing, “sounds like
we will make some serious money.”
A little over a week ago, the
U.S. Securities and Exchange Commission charged Goldman withsecurities fraud, claiming that the investment bank misled clients by selling them on mortgage-related
securities that were doomed to fail.