Emails written by Goldman Sachs executives, released by the United States Senate SubCommittee investigating the financial crisis, reveals that the investment bank was making money while the rest of the world was dealing with the financial meltdown.

In one email a Goldman Sachs manager writes “Sounds like we will make some serious money.” His colleague responded: “Yes we are well positioned.” The manager was reacting to news that the credit rating agencies had downgraded USD 32 billion in mortgage related securities causing losses for many investors by noting that Goldman had bet against them, according to the documents released by the Committee.

In another email, Chief Executive Officer Lloyd Blankfein stated that the firm came out ahead in the mortgage crisis by taking short positions. “Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts,” he said in an email.

In a third email Goldman Sachs Chief Financial Officer David Viniar wrote, “Tells you what might be happening to people who don’t have the big short. There it is, in their own words: Goldman Sachs taking ‘the big short’ against the mortgage market.” Viniar was referring to the firm’s trading activities showing that in one day the firm made over USD 50 million by taking short positions that increased in value as the mortgage market collapsed.

The chairman of the Subcommittee Carl Levin pointed out that 2009 annual report stated that the firm did not generate enormous net revenues by betting against residential related products but pointed out that, in fact, 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,” said Levin, a democrat from Michigan.

“They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients,” he added.

The Subcommittee released the emails, one day after US President Barack Obama came to New York and blasted the Wall Street czars for operating in ways that had forgotten the interests of ordinary citizens and warned against the abuse of the free market.

Tags: goldman recession, goldman sacks

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