Goldman CEO lauded profit from subprime shorts

WASHINGTON (Reuters) – Goldman Sachs Group Inc’s  top executive boasted in late 2007 about the money the  investment bank was making from betting against risky  mortgages, according to a collection of e-mails released by a  Senate panel yesterday.

The emails were released ahead of a hearing on Tuesday by the Senate Permanent Subcommittee on Investi-gations into the  origins of the financial crisis and come as the bank battles a  fraud suit by the Securities and Exchange Commission.

The emails could also help bolster support for financial  regulation legislation that is due to come to the floor of the  Senate tomorrow.

“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 e-mail dating from  November 2007.

“Sounds like we will make some serious money,” said Goldman  Sachs executive Donald Mullen in a separate group of e-mails  from October 2007 about the performance of deteriorating  second-lien positions in a collateralized debt obligation, or  CDO.  The SEC suit charges Goldman hid vital information from  investors about a subprime mortgage-linked security.

The subcommittee is due to hear from Blankfein and other  Goldman executives about the role of investment banks in the  financial crisis.

Senator Carl Levin, the chairman of the subcommittee, said  the emails showed Goldman “made a lot of money by betting  against the mortgage market.”

“Investment banks such as Goldman Sachs were not simply  market-makers, they were self-interested promoters of risky and  complicated financial schemes that helped trigger the crisis,”  Levin said in a statement.

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