Dual Source: Goldman Sachs: Senate 'Cherry-Picked' E-Mails to Make Us Look Bad

[Glaber]

Goldman Sachs: Senate 'Cherry-Picked' E-Mails to Make Us Look Bad
[quote= the usual, Fox News]Goldman Sachs on Sunday accused a Senate panel of cherry-picking a handful of e-mails released the day before that appeared to show top executives at the firm boasting about the money it was making as the housing market collapsed.

The company released its own e-mails to support its argument that it did not know where the market was going and did not get rich off the mortgage meltdown. Spokesman Lucas van Praag expressed concern that only select e-mails were released ahead of a Tuesday hearing where top executives are expected to testify.

"The U.S. Senate subcommittee has cherry-picked just four e-mails from the almost 20 million pages of documents and e-mails provided to it by Goldman Sachs. It is concerning that the subcommittee seems to have reached its conclusion even before holding a hearing," van Praag said in a written statement.

In one e-mail Goldman released, executive Fabrice Tourre said investment products like subprime mortgages were like "Frankenstein turning against his own inventor."

Some lawmakers think Goldman deserves the chance to defend itself.

"There are some conflicts of interest that can exist and do need to be looked at, but I'd rather wait and see how this investigation unfolds before making any judgments," Sen. Bob Corker, R-Tenn., said Sunday on ABC's "This Week."

But others say the e-mails released by the Senate panel were just the latest sign that Goldman was profiting off others' misery while the economy was in turmoil.

The documents suggest that Goldman benefited at least for a time from bets that subprime mortgage-backed securities would lose value.

"Of course we didn't dodge the mortgage mess," CEO Lloyd Blankfein wrote in an e-mail dated Nov. 18, 2007, according to the documents released Saturday morning. "We lost money, then made more than we lost because of shorts."

Short positions, in contrast to long positions, are bets that a financial security will lose value.

The e-mails were released by Sen. Carl Levin's office, who is presiding over an investigation into the financial crisis. Blankfein is among the executives scheduled to testify Tuesday.

In another e-mail, Goldman Chief Financial Officer David Viniar says that in one day the firm made more than $50 million on bets that the housing market would collapse, according to a statement from Levin's office.

"Tells you what might be happening to people who don't have the big short," Viniar writes in the message dated July 25, 2007. Viniar is also scheduled to testify on Tuesday.

Goldman is the target of a civil fraud lawsuit brought by the Securities and Exchange Commission, which alleges that the firm misled investors about how a subprime mortgage-backed security was created. Goldman has denied the charges. [/quote]
[url]http://www.foxnews.com/politics/2010/04/25/goldman-sachs-senate-cherry-picked-e-mails-make-look-bad/[/url]

Goldman knew it profited in crisis
[quote=CNN] Internal Goldman Sachs e-mails released on Capitol Hill Saturday show how the firm used bets on mortgage securities in a bid to profit as the housing market began to plummet several years ago.

A lawmaker set to grill company executives on Tuesday says the documents show that Goldman executives knew their bets would profit the firm.

But the firm said that all of the documents turned over to the panel reveal a different picture -- that the firm lost $1.2 billion in residential mortgage-backed securities in 2007 and 2008.

"Of course we didn't dodge the mortgage mess," Goldman CEO Lloyd Blankfein told company executives in an e-mail dated Nov. 18, 2007 that was released by both the committee and Goldman. "We lost money, then made more than we lost because of shorts," or trading bets aimed at profiting when a bond drops in value.

But Blankfein added: "Also, it's not over, so who knows how it will turn out ultimately."

Four Goldman exhibits were released by Sen. Carl Levin, D-Mich., who chairs the Permanent Subcommittee on Investigation of the Senate Homeland Security Committee.

The e-mails, Levin said, "show that, in fact, Goldman made a lot of money by betting against the mortgage market" and contradict the firm's claim that it was merely buying and selling securities for clients.

The dispute previews an expected showdown on Tuesday when Blankfein and other Goldman executives appear before Levin's committee.

For Goldman (GS, Fortune 500), one of Wall Street's most profitable banks, the stakes are enormous. The firm is staring down fraud charges filed April 16 by the Securities & Exchange Commission for failing to disclose conflicts in a 2007 sale of mortgage securities.

Among the other Goldman executives scheduled to testify Tuesday is Fabrice Tourre, the only individual named in the SEC lawsuit.

'We will be making some serious money'
The Blankfein e-mail was part of one of the exhibits released by the panel in advance of the hearing.

In a second exhibit, Goldman Sachs management committee member Donald Mullen, on hearing of a Moody's mortgage downgrade that would cause losses for many investors, said of the company's bets against those securities: "Sounds like we will be making some serious money."

A third exhibit released by the panel describes the impact of a wipeout of a Long Beach Mortgage Securities Corp. security by saying the "bad news" of the loss costs the firm $2.5 million, but the "good news" is that "we own protection" against the loss. "We make $5mm," meaning $5 million, the e-mail said.

The Senate committee said the fourth document, much of which has been redacted, describes a big loss in the mortgage market in July 2007.

"Tells you what might be happening to people who don't have the big short," David Viniar, Goldman's chief financial officer, said in an e-mail.

The SEC alleges that Goldman allowed Paulson & Co., a New York-based hedge fund, to help select securities in a collateralized debt obligation known as Abacus 2007-ACl, without telling other investors that Paulson was betting the CDO's value would decline.

When the value of the CDO plunged shortly after it was issued, Paulson walked away with $1 billion, while investors lost the same amount, the SEC said.

In a response Saturday to CNNMoney.com, Goldman Sachs spokesman Lucas van Praag said the firm has turned over documents showing that it did not make a significant amount of money in the mortgage market in 2007 and 2008.

"In its statement, the U.S. Senate Subcommittee has cherry-picked just four e-mails from the almost 20 million pages of documents and e-mails provided to it by Goldman Sachs," van Praag said. "It is concerning that the subcommittee seems to have reached its conclusion even before holding a hearing."

Among the documents released by Goldman was a 12-page report on risk management and the residential mortgage market prepared for the Senate hearing. Topics addressed included the accusation of dealing against some of the firm's clients.

"Goldman Sachs did not engage in some sort of massive 'bet' against our clients," the report said. "The risk management of the firm's exposures and the activities of our clients dictated the firm's overall actions, not any view of what might or might not happen to any security or market."

Goldman also released several e-mails written by Tourre that show his belief that the mortgage market was in trouble.

"The summary of the US subprime business is that it is not too brilliant," Tourre tells his French girlfriend in an e-mail dated March 7, 2007. He says that, according to an associate, "that business is totally dead, and the poor little subprime borrowers will not last so long!!!"

How credit watchdogs fueled the financial crisis
The Senate-released documents also offer a rare behind-the-scenes glimpse into Goldman's dealings with the media.

"Tomorrow's story will, of course, have 'balance' (ie stuff we don't like)," van Praag wrote in an e-mail to Blankfein and other top executives about a story due to appear in the New York Times.

"The article references the extraordinary influence GS alums have," van Praag continued in the e-mail dated Nov. 18, 2007. Several former Goldman Sachs executives have held high-level government positions -- most notably then-Treasury Secretary Henry Paulson, the former head of the firm.

Critics say that Goldman benefits from such connections to the government. The Times story, van Praag wrote, would not go "as far as suggesting that there is a credible conspiracy theory. [It] does, however, make the point that it feels like GS is running everything."[/quote]
[url]http://money.cnn.com/2010/04/24/news/companies/Goldman_Senate_documents/index.htm?source=cnn_bin&hpt=Sbin[/url]

Rate me either boxes or clocks. Didn't see the topic on page 2.

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