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.